German institutional property funds produced a total return of 0.5 per cent at the fund level (NAV) in Q2 2014, according to the IPD/BVI German Quarterly Spezialfonds Index (SFIX).
Those funds with an investment focus on Germany returned 1.1 per cent over Q2, substantially outperforming funds with a European focus, which returned 0.0 per cent.
In the first six months of 2014 the performance of all SFIX funds was 1.0 per cent, up from 0.7 per cent between Q3 2013 and Q4 2013. The sub-index for funds mainly invested in Germany stood at 2.4 per cent, up from 1.9 per cent in the previous half year period. Funds with a European investment focus also experienced increased returns, coming from -0.3 per cent in the second half of 2013, to -0.1 per cent in the first half of 2014.
Justus Vollrath, executive director and head of DACH, IPD, says: "The last two quarters saw a strong NAV growth among SFIX funds. On average, funds’ NAV increased by EUR7.3m compared to Q4 2013. Funds focussed on German retail properties and German diversified portfolios showed strongest growth, while the majority of European focussed vehicles remained constant. Investors continue to favour German properties and avoid pure office portfolios."
The IPD/BVI German Quarterly Spezialfonds Index includes 157 SFIX funds, with a value of EUR 36.1 bn. NAV. Market coverage is at 65 per cent, as the market for Spezialfonds as a whole experienced strong growth. SFIX market volume reached EUR 55.7 bn. NAV, an increase of EUR2.6bn compared to the end of 2013.
In comparison with other asset classes, SFIX performance in the second quarter of 2014 stood below German equities at 2.9 per cent (MSCI DE) and German bonds (JP Morgan GBI Global, DE 7-10 years), which returned 2.5 per cent.
The moderate returns from Spezialfonds have been accompanied by low volatility during the recent economic crises. While the annualized return volatility of the SFIX between 2007 and 2013 was 1.3 per cent pa, equity and bond returns fluctuated much more strongly, with volatilities of 23.2 per cent pa and 6.6 per cent pa respectively.