Research - MARCH 29, 2017

Property funds return 2.3% in Q4, 7.9% in 2016

by Released 3/29/17

Annual total returns for property funds in 2016 were 7.86 percent, down from 12.14 percent in 2015 and 9.64 percent in 2014, according to the Global Real Estate Fund Index released by NCREIF in collaboration with INREV and ANREV.

The GREFI consists of 479 funds as of fourth quarter 2016 with total gross asset value of $616.7 billion. Europe represents the largest count of funds, at 277, compared with 98 in the United States, 86 in Asia Pacific and 18 funds with a global strategy. The United States accounts for the largest share of GREFI GAV, at $300.3 billion or 49 percent, followed by Europe with $196.4 billion, or 32 percent.

In fourth quarter 2016, the GREFI returned 2.29 percent, up from 1.74 percent in the prior quarter, but down from 3.21 percent in fourth quarter 2015. European funds, with a return of 2.58 percent, edged past Asia Pacific (2.48 percent) for fourth quarter 2016 performance, while U.S. funds returned 2.14 percent. Funds with a global strategy had a 1.19 percent total return for the quarter.

By region, annual total returns were 10.79 percent in Asia Pacific, 8.49 percent in the United States, and 6.54 percent in Europe. Thus, 2016 marked the first calendar year of outperformance by the Asia Pacific region since GREFI’s inception.

By style, core funds represent 60 percent of the GREFI fund count, at 288, and 77 percent of GAV, at $476.9 billion. Noncore funds include both value-added and opportunistic strategies. Core funds (2.21 percent) underperformed noncore funds (2.62 percent) in the fourth quarter, as they have for all but six quarters of GREFI history. On an annual basis, noncore funds led performance with an 8.72 percent total return, compared with a return of 7.65 percent for core funds.

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