UK pooled property funds recorded their worst three-month performance in the third quarter since March 1993.
The IPD All Pooled Funds Index returned -1.7% in the three months to 30 September. This is the first negative return recorded by the market since March 1993.
Despite the negative return, the pooled property fund market outperformed the listed property companies and trusts by 8.6% and the broad equities market by 10 basis points.
‘The results firmly indicate that the UK commercial property market and the funds investing in it, are encountering conditions not experienced for over a decade,’ said Cameron McVean, head of fund services at IPD. ‘It is clearly a testing time for all concerned. However, value can still be found within the specialist areas of the market, and it is the student accommodation funds which stand out amongst the crowd.’
Although not directly comparable, the performance of the All Pooled Funds Index remained broadly in line with that of the direct property market, which returned -1.0% for the third quarter.
Balanced funds, of which the largest are managed by Standard Life Investments, BlackRock, UBS and Schroders, generally recorded negative or zero returns during the quarter. Negative returns were also very evident throughout the specialist part of the market, notably at Arlington Business Park Partnership, Hercules Unit Trust and the Junction.
Retail and industrial specialists generally experienced the worst performance of the quarter, with retail warehouse funds experiencing the largest drop in values.
Although office funds overall faired better than their retail and industrial counterparts, it was in this sector where the largest spread of returns could be found ranging from -12.9% to 4.4%.
Funds focused on central London provided returns at the upper end of this spectrum, indicating that this market segment continues to hold value against the wider market.