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Italian pooled property funds delivered positive returns for the second consecutive year in 2010, at 1.7%, a solid improvement on 2009’s 0.2%, according to the Italian Pooled Property Fund Indices (Italian PPFI).
The H2 total return, of 1.5%, accounted for almost all of the growth, as the first half of 2010 saw declining returns that fell to 0.2%. Comparatively, returns for direct Italian commercial property in H2 were 2.7% as measured by the IPD Italy Bi-Annual Index.
The Italian PPFI universe – made up of 37 funds, 16 of which are “blind pool” and 21 “seeded,” with an aggregate net asset value of €8.7bn – continued to see divided returns. For the ninth consecutive year seeded funds outperformed blind pool funds, by 300 basis points, returning 2.9%, to -0.1%. In H2 the gap narrowed as the overall market improved, with blind funds delivering 0.7%, and seeded funds 2.0%.
Source IPD Italy PPFI index
Drilling further into the universe, within the blind and seeded fund pools, the second half performance for balanced and specialist funds was 0.4% and 2.0%, respectively, and for the 12 months, returns were -0.6% and 2.9%. Overall, seeded and specialist funds outperformed the all pooled fund average, while blind pooled and balanced funds both underperformed the Italian PPFI benchmark on a six and 12-month basis.
Over the 12 months to December 2010, all pooled funds outperformed all other asset classes: equities delivered -9.8%, while property equities remained negative at -1.4% and bonds could only manage -0.6%. Over a five year period, Italian PPFI funds returned 4.2%, while bonds, 3.4%, property equities, -16.0%, and equities, -6.9%, continued to trail behind.
Luigi Pischedda, IPD’s Country Manager for Italy, said: “Italian property fundamentals finally showed signs of recovery over the second half of last year, which is reflected in the upswing in performance of the market’s pooled property funds.
“The performance story between fund types – blind and seeded – was one of the strongest returns by funds that were in strong performing parts of the market and not in parts of the market that continued to struggle at the back end of last year. More modest leverage in Italian pooled funds was a less significant factor between the best and worst performing funds.”
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