UK funds score first ever quarterly double-digit return

UK funds delivered a 10.4% return in a single quarter in the final three months of 2009, reflecting the ‘dramatic’ and rapid reversal in the underlying property market. The funds’ double-digit return was the first ever in the 20-year history of the IPD UK Pooled Property Fund Indices (UKPPFI).

Every one of the 25 balanced and 35 specialist vehicles delivered a positive return: balanced funds returned 7.9% while the return from specialist funds, which are often higher-geared, was 13.9%.

Cameron McVean, head of fund services at IPD, said: “The pooled fund returns for 2009 reflect the dramatic reversal of fortunes in the UK property market over Q4 and, among other factors, the positive influence of leverage in rising markets.”

However, after suffering continuing declines in value in the first half of 2009, the annual total return for all 60 of the funds in UKPPFI was -5.4%, marking the third year of negative returns, although a much better result than the -32% total return recorded for the previous year.

According to IPD’s monthly index, by comparison the direct market recovered ground faster in the second half of the year and delivered an annual return of 2.2%.

Property shares, meanwhile, finished the year with a 10.2% annual return. The spread of annual returns across the 60 funds was huge, at 91.6%.

The worst performing fund was The Junction, which returned -58.4%; the best was The UK Logistics Fund, which returned 33.2%.

Aberdeen Property Investors has withdrawn the Credit Suisse UK Real Estate Fund from the UKPPFI. The fund manager, which bought the fund with others from Credit Suisse in December 2008, said it was reviewing the strategy of the vehicle and would be rebranding it as the Aberdeen UK Balanced Property Fund.