Pan-European fund returns accelerated through 2013 to deliver a 5.2% return for the year – the highest 12-month performance since September 2011.
According to the IPD, the four consecutive quarters of positive returns was a strong acceleration compared with 0.5% for the year to June 2013, and 2.5% for the year ending September.
The healthy level of returns was driven by the strong performance of the underlying assets which delivered a similar return to the fund level index.
Underlying property returns in the IPD Pan-Europe Quarterly Property Fund Index slowed slightly in Q4 to 1.8% for the quarter, after a strong third quarter saw returns of 2.2%.
This took the Euro-denominated performance for the full year 2013 to 6.0%.
Income return remained the main driver of growth, with 1.6% recorded for the quarter ending December, but capital returns have confirmed their return to positive territory with 0.2% growth in December after 0.5% in September.
By country, quarterly asset level performance was boosted by UK and CEE assets – both making up 13% of the total capital value – while German and French assets comprising just under 50% of the total value were a drag to growth.
Although asset level performance was positive, it was not high enough to bring about a positive leverage effect.
Relatively high leverage of around 37% combined with a high cash position of 7% were detrimental to fund level performance, which has been consistently below asset level return for the past five years, though the gap is narrowing with higher asset level returns.
The index outperformed bonds, which returned 0.8% in Q4 2013, but lagged equities, which returned 6% over the same period. European property equities also registered a relatively strong quarterly return at 3.6%.
The IPD Pan-Europe Quarterly Property Fund Index is based on the full universe of core Pan-European open-ended funds that are appraised quarterly to IFRS standards with performance validated by IPD.
