Italian property funds delivered a disappointing performance last year with the IPD Italy Biannual Property Fund Index published on March 14, 2013, showing a total return of -5.8 percent for the full 2012. The second half of the year delivered a return of -3.7 percent, compared to the milder -2.2 percent for the six months to June 2012. The performance represents the second consecutive below-zero result and the lowest return in the index series, according to a press release published alongside the index changes.
Italian real estate funds were the worst performers among all investment alternatives in both halves of 2012. Equities delivered 13.3 percent and 11.7 percent in H1 and H2 respectively, real estate stocks delivered 29 percent and 27.7 percent, and bonds were at 13 percent and 24.8 percent.
“Italian real estate funds have indeed suffered the effect of a prolonged economic crisis. However, when put into perspective and blended in the mix of the broader marketplace with its investment options, property funds unveil some strength and the pressure of the economic crisis eases off when we look at a longer-term horizon,” commented Luigi Pischedda, Country Manager Italy, IPD.
The disappointing year-end return delivered by property funds was the result of a 4.6 percent fall in net asset value (NAV), which has been decreasing for the past five years. The dividend distribution’s growth of 0.9 percent was insufficient to offset the negative effect from the NAV drop.
„The Index recorded a distribution yield of 1.9 percent, which compares with a ratio of 2.8 percent in 2011 and 4.4 percent in 2010. This is a sign of the prolonged crisis taking its toll on end investors through poorer cash flows,” Pischedda said.
**About IPD Italy Biannual Property Fund Index**
The IPD property funds index measures bi-annual (net of fees) NAV total returns to property funds with 85 percent or more of their capital invested in the Italian real estate market. It includes funds suitable for both retail and institutional investors and funds organised under a number of closed and open-ended investment scheme structures.
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The IPD Italy Biannual Property Fund Index is divided into four sub-categories –seeded property funds, blind pool property funds, specialist property funds and balanced property funds. The seeded funds index comprises of those funds where the property portfolio was made available before initial capital raising began. The blind pool funds index includes funds that raised capital before initiating investment activity. Specialist property funds are those with 70 percent or more of their capital invested in one specific market sector such as office, industrial, retail or residential. The balanced property funds are broadly diversified across the main property sector.
In 2012 the IPD Italy Biannual Property Fund Index included 42 investment vehicles with a total net asset value of about €7.7 billion (₤4.6 billion).