UK - Total annual returns for all pooled property funds hit -32% over 2008, according to the IPD UK Pooled Property Fund Indices' fourth quarter results for 2008.
All pooled property funds continued their downward trend and revealed the extent of the property market crisis by delivering returns of -18.7% in the fourth quarter of last year and delivering negative returns for the year of 32% compared to -6.7% in 2007.
Cameron McVean, head of fund services at IPD, said: "The results have been significantly affected by a softening of yields, which has lead to right downs in asset values over the year. There is also quite a lot of bad news in the economy so expectations for rental growth, which drives the underlying performance, will have retrenched somewhat."
Of the 64 pooled funds with a total net asset value of £24.2bn, balanced funds performed better than specialist funds, returning -13.4% over the fourth quarter and -23.9% over the year. Specialist funds lost 24.4% in the final quarter and dropped a massive 40% over the year.
"If you take a look at the gearing figures, the gearing within specialised funds tends to be a lot higher. As values have contracted the percentage of debt to equity in the portfolios has increased, as property values decrease, so the equity portion of the capital pile becomes increasingly reduced.The higher the gearing the greater the impact on returns to investors in either direction," said McVean.
Fund level costs and gearing effects meant the All-Pooled Funds Index returns for the year performed worse than those of direct property measured by the IPD UK Monthly Property Index, which delivered -22.5%. They also underperformed the UK equity market, as FTSE All-Share Index returned -29.9%.
Listed property trusts and companies suffered more from global market pressures, however, delivering returns of -46.6% over 2008, as measured by the FTSE Real Estate Index.
Despite falling returns, Pooled Property Funds continue to lead all major UK asset classes over a 10-year period, according to IPD. Annualised returns over three, five and 10 years stand at -8.5%, 2.2% and 6.8% respectively.
The IPD UK Pooled Property Indices are sponsored by the Association of Real Estate Funds (AREF) and HSBC Global Asset Management (UK) Limited.
If you have any comments you would like to add to this or any other story, contact Poppy Sketchley on + 44 (0)20 7261 4629 or email firstname.lastname@example.org