UK - Pooled UK real estate funds have delivered returns of more than 20% over the past 12 months, but only those with specialist and niche strategies outperformed the underlying direct market, according to Investment Property Databank (IPD).
The IPD UK Pooled Property Fund Indices (PPFI) reported an annual total return of 22.9% over the 12 months to the end of June, although this was actually below the 23.9% direct market return for the same period.
The indirect fund performance represents the second-highest rolling annual return to June in the last 10 years, behind the 24.7% delivered over the 12 months to the second quarter of 2006 - at the height of the real estate bull market in the UK.
Over the 12 months to June, specialist funds, which adopt esoteric strategies and apply higher levels of leverage, delivered 28.8%, outperforming the direct market by almost 500 basis points.
Balanced funds, meanwhile, returned almost 10 percentage points lower than specialist funds, at 19.0%.
Cameron McVean, head of fund indices at IPD, said: "Specialist funds have comfortably outperformed the main market over the last 12 months, driven by successfully applied, focused strategies, as well as by the positive impact leverage can have in rising markets."
During the 12-month rebound in pooled property fund performance, UK PPFI funds outperformed domestic real estate investment trusts, equities and gilts, which returned 19.2%, 21.1% and 7%, respectively.
Returns were much more modest over the second quarter of 2010, with balanced and specialist funds delivering 3.1% and 4%, respectively.
Across the 60-strong fund constituents, all but two funds delivered a positive return for the quarter, with performances ranging from a loss of 3.9% to a gain of 10.7%.
Pooled UK real estate funds have recovered substantially since the 48.8% lost over the preceding two years, with the PPFI showing funds almost reaching October 2008 levels.
Specialist funds dominate the IPD UK PPFI, numbering 34 versus 26 balanced funds.
They are valued quarterly and had a combined net asset value of £25.3bn at June 2010.