Property equity funds greatly outperform direct investors

Asian property securities led the way in terms of total return during this year, as the Henderson Horizon Asia Pacific Property Equities fund and the First State Asian Property Securities fund are the top two performers in the IMA Property sector year to date, returning 36.2 per cent and 33.5 per cent respectively.

In total, 12 members of the IMA Property sector have delivered returns of over 20 per cent this year, all of which invest in property securities. Seven members of the sector have lost money this year, all of which invest directly in property.

Propping up the sector year to date is the Aviva Investors Property Investment fund, which invests directly in a range of UK properties. It has lost 6.4 per cent for investors so far this year and has lost 27 per cent over the last five years.

The IPD UK Monthly Property index, which calculates the average returns from funds that invest directly in property, whether retail, office or industrial, has delivered a return of 2 per cent so far this year.

However, the smaller total return has been down to the capital loss from property rather than the income. In October, the total return from property was 0.3 per cent, when the yield generated 0.6 per cent but there was a 0.3 per cent average capital loss.

By contrast, in October UK property equities, as measured by the FTSE All-Share Reits Index, delivered a return of 4.2 per cent, of which 3.7 per cent was a capital gain and 0.5 per cent as income.