First net inflows in UK pooled property funds in a year

By Nick Duxbury

UK pooled property funds have seen the first net inflows in a year in the second quarter of 2009 according to the Association of Real Estate Funds (AREF).

In its Investment Quarterly for the second quarter of the year it revealed a net inflow of £52.4m from £320.4m of new money that entered pooled property funds compared to £268m of redemptions.

This was the first net inflow since the second quarter of 2008 when funds saw inflows of £39.2m.

The report, which examines trends in 67 UK unlisted pooled property funds representing a net asset value of £21.1bn, found that redemptions in the second quarter were significantly lower than previous quarters.

It also found that the secondary market traded £116m, up 114% from the previous quarter.

The weighted average yield was 5.7% in the second quarter – down on the previous quarter’s ten year high of 6.1% but still higher than the second quarter of last year’s weighted yield of 4.1%.

Pooled property fund total returns fell by 5.2% quarter-on-quarter in Q2 2009, compared to the previous quarter’s drop of 11.1%.

Over 12 months, returns were down 36.1% while real estate equities dropped by 43.4%.

Rachel McIsaac, AREF chief executive, said: ‘Not only were net sales positive for the first time in a year, but actual redemptions have also started to see a significant slowdown over the past couple of quarters.

‘This could be an indication that the direct property market cycle might be in the process of stabilising.

‘It is also worth noting that authorised property funds accounted for 63% of new money raised in Q2, signalling investor confidence is slowly returning.

‘This is in line with the Investment Management Association’s latest statistics which show authorised property funds first net retail inflow since Q3 2007.’ (Nick Duxbury, Property Week) http://www.propertyweek.com/story.asp?sectioncode=297&storycode=3146412&c=1

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