The UK’s 63 pooled property funds raised just £167m in the first quarter of this year – the lowest quarterly figure for eight years.
According to the Association of Real Estate Funds, the majority of money raised in Q1 – the lowest amount since Q3 2003 –came from new rather than existing investors.
AREF chief executive John Cartwright said the trend, following an apparently strong recovery in late 2009/early 2010, “has echoes of the double-dip recession in the wider economy”.
Despite the low level of money coming in, capital net flows remained positive at £106m as redemptions fell to just £61m – the lowest figure since Q4 2004.
The return to positive capital inflows follows two quarters of negative flows.
The 63 funds pooled property funds delivered an average quarterly return of 0.7% in Q1, down from 1.2% in Q4 2011.
This was the fifth consecutive reduction in the quarterly return rate since the peak of 2.7% in Q4 2010.
AREF also found that balanced funds outperformed specialist funds for the third quarter running. This run by balanced funds comes after eight consecutive quarters of specialist funds outperforming balanced funds.
Cartwright said: “The continued trend of balanced funds outperforming specialist fund is expected in a relatively low return environment. Also, specialist funds have tended to use higher levels of gearing, which is now acting as a drag to performance.
bridget.oconnell@estatesgazette.com
