Unlisted real estate funds delivered returns of 3.8% in the last three months of 2014, according to the AREF/IPD UK Quarterly Property Fund Index.
By comparison, returns from direct commercial property stood at 4.4% over the same period, as measured by the IPD UK Monthly Property Index, and returns for bonds and equities were 5.1% and -0.4% respectively.
Over the whole of 2014, funds in the index returned 16.4%, just below the IPD UK Monthly Property Index, which saw a total return of 19.3%.
Shopping centre and retail warehouse funds lagged balanced funds and other specialist sectors, with seven out of eight funds returning less than 20%.
The strongest sector specialist funds were industrial and London office funds, whose returns ranged from 19.1% to 30% in the case of industrial and 21% to 43.9% in the case of London offices.
Phil Tily, executive director, MSCI, said: “Balanced funds performed strongly throughout 2014, showing a total return spread between 11.4% and 24.2% over the course of the year. Long income, low risk funds returned a more modest 9.9%, which is not surprising given the nature of the current rising market.
“The level of cash remained consistent throughout 2014, and we saw a continuation of the trend of the last couple of years of debt levels falling from 12.3% to 10% year on year.”
The index is comprised of 25 balanced, 19 specialist and four long-income quarterly-valued funds, with a combined net asset value of £38.5bn at the end of the fourth quarter.