The IPD France Institutional OPCI Property Fund Index, published in partnership with ASPIM, showed a six month total return of 1.7 per cent as at 30 June 2014.
This gives annual performance of 4.2 per cent – 30 basis points below the previous lowest annual performance – registered in H1 2012.
However, over four years, French property funds recorded an annualised total return of 6.8 per cent p.a.
Unlike the previous half-year, the strongest performance was recorded by the 25 vehicles whose debt level exceeds 50 per cent of gross asset value, at 2.3 per cent over six months. These highly leveraged funds are, contrary to other vehicles, following on their last semester upwards trend.
Despite providing the strongest annual distribution yield at 3.7 per cent, the six-month total return of the 52 funds with a level of debt lower than 50 per cent of gross asset value lost 120 basis points, compared with H2 2013, to reach 1.9 per cent. Unleveraged funds suffered a strong decrease, remaining in positive territory, returning 0.5 per cent. This led to an annual performance of 2.6 per cent as at 30 June 2014, significantly below leveraged funds (respectively 4.4 per cent pa and 4.8 per cent pa for funds with level of debt lower than 50 per cent and higher than 50 per cent).
Notably, the 25 retail-specialist funds, which usually boost the index performance, delivered 5.5 per cent pa, almost half of December 2013 annual total return of 9.5 per cent. Meanwhile, the 31 specialised office funds maintained an annual total return of 3.9 per cent, compared to 3.8 per cent for the previous half-year.
Comparing with other asset classes, property equities (MSCI FR) registered the strongest performance at 19.8 per cent, much higher than for the previous six months. They are followed by bonds (JP Morgan GBI Global, FR 7-10 years) which returned 8.1 per cent, significantly higher than the December 2013 performance of 1.2 per cent. Over the last three years, Institutional OPCI French property funds remain positioned above inflation but still distanced from other asset classes.
Olivier Mege, executive director at MSCI, says: “Some June 2014 net asset values (NAV) were impacted by swings in tenant structures, such as departures or renegotiations, which led to NAV stagnation at constant scope. Yet, thanks to new funds having been recently created and some joining the index, the total NAV of the sample slightly grew, reaching EUR15bn (+6 per cent) at the end of June 2014. The coverage ratio of the index is estimated to be 75 per cent of the total gross value of Institutional OPCI assets under management.”
The value of the underlying property holdings in these funds rose to EUR22bn as of the end of H1 2014. The largest sectors in the index, by net capital value, remains offices (45 per cent) and retail (23 per cent). Logistics & industrial properties’ weight remains flat at 10 per cent, whereas hotels carry on its increase, making up to nine per cent of the sample.