IPD Releases Global Quarterly Property Fund Index

Real estate industry analysis provider IPD has released its inaugural IPD Global Quarterly Property Fund Index, a benchmarking of fund-level real estate performance across global markets, and the numbers for 2012 were, well, relatively modest.

IPD’s Peter Hobbs

Real estate industry analysis provider IPD has released its inaugural IPD Global Quarterly Property Fund Index, a benchmarking of fund-level real estate performance across global markets, and the numbers for 2012 were, well, relatively modest. The GPFI posted a 12-month total return of 7 percent at net asset value level and 7.9 percent at direct asset level. 

The GPFI tracks 72 open-ended funds covering 4,600 properties with a total capital value of $172 billion. “The funds within the index epitomize the new model for real estate investing, post global financial crisis–generally core bricks-and-mortar real estate, with a strong emphasis on transparency and seeking to attract long-term investors in real estate,” Peter Hobbs, senior director with IPD, told Commercial Property Executive. “The robustness and relevance of the investment model suggests that more funds will join the index and capital will continue to be attracted to the sector.” 

The results of the GPFI pale in comparison to those from the MSCI World Equity Index, an index produced by IPD parent company MSCI Inc., which recorded a performance in the double digits. However, North America did its part to bolster the GPFI numbers with a return of 9.9 percent at NAV level and 9.7 percent at asset level. Asia played a positive role as well, with an asset level performance of 9.1 percent compared to Europe’s 2.7 percent.

The results, glowing or no, are what IPD expected, for the most part. “On the one hand, there were no real surprises, with North America and Asia Pacific performing stronger than Europe and core real estate continuing to fulfil a solid role in a multi-asset class portfolio,” said Hobbs. “But there were some details that did surprise, such as the divergence between the double-digit North American returns and the value declines in the U.K. Both North America and the U.K. recovered strongly from the financial crisis in 2010 and 2011, but while North America continued to post strong performance in 2012, there was a significant reversal in the U.K. market.” 

While the global 2012 returns were weaker than the equity market, the opposite was true of the three-year returns, a consequence of a lower-risk climate over the longer period of time. The three-year NAV and asset level returns were 10.3 and 10.4 percent, respectively.

Looking ahead, IPD is cautiously optimistic regarding expectations for 2013. “Real estate is set for another year of solid, mostly income driven return in 2013, but there remains a series of risk that overshadow the market, including the weak economic outlook, particularly in Europe, and financial market uncertainty,” Hobbs added. “There could be another year of divergence between the strong performing North American markets, and the weaker markets of Europe but at some stage, European markets will reach a bottom and start to see improved performance.”