The combined net asset value (NAV) of UK unlisted property funds leapt by £6.5bn in 2014.
This week, new figures from the AREF/IPD UK Quarterly Property Fund Index revealed that the combined NAV of the 48 funds in the index rose 21.2% over the year to £37.1bn.
The best performers were central London office funds, whose annual returns ranged from 21% to 43.9%, while the poorest were retail funds, whose returns spanned 6.6% to 28.3%.
The 25 balanced funds in the index, whose returns were constrained by the fact they are generally not as highly leveraged as the specialists, delivered returns of between 11.4% and 24.2%. The top three by total annual returns were Fidelity UK Real Estate Fund, AEW UK Core Property Fund and COIF Charities Property Fund (see table).
Total returns from all the funds in the index were 16.4%, which was slightly below direct commercial property returns of 19.3%, as measured by the IPD UK Monthly Property Index. The poorer performance of the index reflected the low returns on the cash held by funds.
IPD executive director Phil Tily told Property Week: “Returns were much stronger than predicted at the start of last year, when most people were anticipating low double-digit returns. Real estate is clearly benefiting from increased allocations being made to the sector across the globe.”
In the final quarter of 2014, unlisted funds delivered returns of 3.8%, only a fraction below the 3.9% achieved the previous quarter. By comparison, returns for bonds and equities over the period were 5.1% and -0.4% respectively.
Tily said the market fundamentals pointed to another year of strong returns, although they were unlikely to reach the levels seen in 2014. “Rental growth will start to have more of an impact this year,” he said.
|Top five balanced funds||One-year returns||Leverage (% ND/NAV)|
|Fidelity UK Real Estate Fund||24.2||-1.9|
|AEW UK Core Property Fund||22.1||-1.7|
|COIF Charities Property Fund||20.0||2.1|
|Hermes Property Unit Trust||19.7||-5.6|
|The Local Authorities Property Fund||19.5||-5.1|
|Top five specialist funds||One-year returns||Leverage (% ND/NAV)|
|UBS Central London Office Value Added Fund||43.9||-4.5|
|Industrial Property Investment Fund||30.0||32.5|
|Grosvenor Liverpool Fund||28.3||88.9|
|Grosvenor London Office Fund||27.6||49.5|
|Ashtenne Industrial Fund||24.5||41.2|