Private investor property funds benefited from a turnaround in fortunes in the first quarter of 2008, and some posted positive total returns.

This is a significant swing for the sector, which in the fourth quarter of 2007 underperformed the overall property Benchmark as investors lost confidence as a result of falling property values.

Some of the quickest and most brutal markdowns in the industry came from private investor funds, many of which switched to fortnightly valuations at the end of last year to make valuations as accurate as possible during a period of volatility. The value of Scottish Widows Investment Partnership’s (SWIP) portfolio reduced by almost 8% in November alone, and there is now a sense that, barring a new downturn in values and rents, the sector can now provide positive returns through rental income and asset management.

Figures from fund information service Trustnet, show that the average return for the first quarter for the seven largest authorised unit trusts property funds sold directly to the man on the street was around -1%.

In the last quarter of 2007, pooled property funds returned -9.1%, says the Association of Real Estate Funds. Private investor funds were among the worst performers.

The £942m M&G Property Portfolio and the £998m Scottish Widows Investment Partnership UK Property Trust were the top two performers, achieving total returns of 2.1% and 1.8% respectively (see table).

‘Capital values seem to have stabilised,’ said Gerry Ferguson, manager of the SWIP fund. ‘We’re probably one of the higher-yielding funds; we have good-quality properties with good-quality rents.’