German real estate funds in the Euro crisis: solid returns in local markets

First quarter 2013 results for German institutional property funds (IPD/ BVI German Quarterly Spezialfonds Index) and German retail property funds (IPD German Monthly Open Ended Funds Index) stood at 0.3% and 0.0% respectively. In both groups of funds, those vehicles invested in Germany substantially outperformed European-targeted funds. 

Daniel Piazolo, Managing Director of IPD, said, “We now receive data at least quarterly for 152 German funds with a Net Asset Value of EUR 105 bn. We are therefore in a position to provide crucial insights into the performance of all real estate funds subject to German investment law”.

German institutional property funds focused on the domestic market produced a total return of 1.0% at the fund level (NAV) in Q1 2013, and 3.4% over the last twelve months. Institutional funds with a European investment focus only returned 0.0% in Q1 2013 and 0.3% over the last year.

The outperformance of German-invested funds is equally strong among property funds for retail investors. The OFIX Germany funds sub index returned 0.5% in Q1 2013, while European-allocated OFIX funds returned 0.0%. Over the last four quarters, the German sub index achieved 2.3%, while European focused retail funds realised a loss of -0.3%. When comparing OFIX Germany and OFIX Europe results, among the European sub index, eight out of 13 funds have entered liquidation, while none of the five OFIX Germany funds are in this position. All those OFIX funds that are in liquidation have so far shown poor returns.

“Since the beginning of the German retail fund crisis, those funds that went into liquidation have shown weak performance, and the OFIX Europe index has reflected those return impacts ever since. However, European allocated funds for institutionals have performed equally poorly, and for them there is no significant liquidation problem,” added Piazolo.

Over the last five years, the outperformance of SFIX Germany funds has been even more pronounced, with annualised returns of 3.9%pa compared to 1.3%pa for SFIX Europe. 130 funds worth EUR 31.9 bn. in terms of NAV, contribute to the IPD / BVI German Quarterly Spezialfonds Index SFIX, and both sub indices comprise more than 50 funds; the SFIX Germany funds are worth EUR 11.0 bn. and the SFIX European funds EUR 18.5 bn.

While the European funds are predominately invested in office properties, the sector allocation of German-focused funds is much more diverse and includes funds investing in retail properties and logistic funds, as well as hotel and health care property funds. At a sector level, funds investing in office properties have shown the weakest performance, and therefore the outperformance of SFIX Germany funds is partially attributable to the underperformance of office property across Europe.