Performance of average funds over 1-yr
Source: Financial Express Analytics
In the past year, funds that invest in property worldwide have returned 9.13 per cent to investors, while UK funds have returned 6.94 per cent. The average global property fund’s returns reached 12.5 per cent earlier this year, before dropping below 10 per cent at the start of March. The drop highlights the downside of global property funds: increased volatility.
Performance of average funds over 3-yrs
Source: Financial Express Analytics
Over three years, global property funds with at least a three-year track record returned 4.95 per cent to investors, while UK property funds lost 3.16 per cent. The payoff, again, is that the global property funds were far more volatile in this period.
"I suspect that global property funds will have access to high-growth areas such as Asia, so you would expect them to perform better than a UK property market that has been struggling and may continue to struggle for some time yet," AFH Wealth Management’s Graham Toone said.
There are fewer global property funds with a track-record of longer than three years, so averages become more skewed over periods greater than this, but global funds still seem to have fared better.
Looking at individual funds over five years, there are just two vehicles that invest primarily in the UK and have given positive returns over five years: Royal London Property and L&G UK Property Trust, returning 9.5 per cent and 4.4 per cent respectively.
Tim Cockerill, head of collectives research at Ashcourt Rowan, said: "UK funds tend to invest in bricks and mortar, but the global funds are equity-based."
Likewise, there are just two funds with a global property focus that have given positive returns: Henderson Horizon Asia Pacific Property and Schroder Global Property Securities. Both returned more than the UK funds, however, with 22.1 per cent and 9.7 per cent respectively.
"This emphasises the benefits of diversifying and not relying on any single market or fund. That's why we launched our global fund of funds – no single country can always do well throughout the cycle," said Guy Morrell, manager of HSBC Open Global Property.
The Trustnet Alpha Manager added: "It may also be due to the equity effect. Global property funds tend to be at least partially, but usually mostly, equity invested."
"We've seen that UK direct property has performed strongly since 2009, but in capital value terms it's still 35 per cent below its 2007 peak. By contrast, global listed property is 25 per cent below its peak in sterling terms."