Balanced property funds most resilient through Q3 slowdown

By Bridging Loan Directory -

Balanced pooled funds have outperformed specialist funds for the first time in two years, according to the AREF/IPD UK Pooled Property Funds Indices (UK PPFI).

Specialist fund returns slid by 70 basis points q/q to 1.3%, while balanced funds saw a shallower decrease to 1.7%. The all property fund return for the three months to September was 1.5% (down from 1.9% in Q2).

Malcolm Hunt, Director of UK and Ireland Client services, said:

“Market turbulence over Q3 has seen capital growth slow by another 60 basis points for specialist funds, to 0.4%, as growth has tailed off in the bulky retail sectors that had previously buoyed performance. Balanced funds, with their more evenly distributed portfolios, have benefited from a muted recovery in South East offices and industrials.

“Despite the dwindling returns, property performance has been positive and looks particularly resilient compared to the decline seen by equities, and REITs, which suffered a torrid three months. Equities fell by 13.5%, while REITs suffered a fall of 20.8%, according to the FTSE All Share Index and the FTSE All Share REITs index.”

The average gross loan to value ratio remained stable in Q3, at 16.9% as the de- gearing of specialist funds, which have seen debt fall from 47% of GAV to 32% since June 2009, slowed considerably. Average cash (as a per cent of GAV) holdings remained stable for specialist funds at 4.2% and reduced by half a per cent for balanced funds, to 6.8%.