Pooled property funds continued to underperform the broader property market in the first quarter.

Figures from Investment Property Databank’s Pooled Property Fund Index show that property funds produced a total return of -4.9% in the first quarter, compared to a return of 3.4% for the industry as a whole.

The rate of decline has moderated since the fourth quarter of 2007, when the index showed a return of -9.1%. But it is still uncertain as to when the sector will start to stabilise.

Listed resurgence

The figures mean that property funds outperformed equities in the first quarter, but lagged behind the listed property sector, which staged a comeback in the first quarter and showed returns of 1.8%.

In the longer term, pooled property funds have produced a return of -13.4% in the past twelve months, compared to gilts at 9.7% and equities at -7.7%.

Balanced funds fared better than the average, producing a return of -3.8%. Amongst individual funds, the Residential Property unit Trust, managed by Schroders, was the best performer, with a return of 0.6%, while the ING Central London Unit Trust was the worst performer with a return of -17.2%.

Some way from the bottom

Cameron McVean, head of fund services at IPD, said: ‘Although the downward trend of the market has decelerated, the results indicate that there may still be some distance to go until the bottom is found.

‘The range of results does indicate that although the market as a whole may be beginning to stabilise, some areas continue to experience significant turbulence.’