Sharp differences in annual fund returns

Industrial property and long-income funds have delivered the best returns in the AREF/IPD UK Quarterly Property Fund Index over the past year.

This week, new figures for the quarter to 30 June were revealed showing that in the year since the EU referendum the average fund return was 5.4%.

The specialist property fund index significantly underperformed the overall index, with average returns of just 2.7%.

The performance of individual specialist funds varied enormously reflecting the vastly differing fortunes of different sectors since the Brexit vote. Legal & General’s Industrial Property Investment Fund delivered the best returns of 15.1% - it is also the top performer over three years with average annual returns of 18.8%. Three other funds spanning industrial, healthcare and leisure also delivered double-digit returns over the past year.

However, the average was dragged down by the negative returns suffered by retail funds and London office funds.

Meanwhile, long-income funds outperformed the overall index significantly over the past year, with returns of 7.9%, reflecting strong investor demand for secure income.

The two best-performing balanced funds in the year to 30 June were AEW UK Core Property Fund and Kames Active Value Property Fund, which each have a strong regional focus and no exposure to London offices. L&G’s Managed Property Fund delivered the third-best returns, boosted by strong letting activity in the fourth quarter.

However, one fund manager warned that the unwinding of Brexit-related pricing adjustments may have affected the return figures for some funds.

In the second quarter, the overall index delivered a return of 2.2%, which was fractionally above the 2.1% recorded in the first quarter.


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