Thanks to strong performance in China and a major surge in Japan, non-listed real estate funds in Asia Pacific have outperformed the US and Europe for the first time in two years, according to figures from an independent industry association.
For the final quarter of 2014, funds in Asia Pacific turned in a performance of 3.6 percent, ahead of the US at 3.1 percent and Europe at 2.4 percent, while total global performance for the quarter was 2.9 percent. However, on an annual rolling basis, the US remains dominant at 11.8 percent versus 9.4 percent for Asia Pacific and 8.9 percent for Europe.
Non-Core Funds Rising Fastest
The comparison of global real estate fund performance was revealed in the latest Global Real Estate Fund Index (GREFI)., which draws together data from the Asian and European Associations for Investors in Non-listed Real Estate Vehicles (ANREV and INREV) and the National Council of Real Estate Investment Fiduciaries (NCREIF).
The index also shows an uptick in the performance of non-core funds over core funds in the final quarter of 2014 at 4.1 percent and 2.6 percent, respectively. On a rolling annualized basis, non-core funds hit 10.6 percent in 2014 – still ahead of core at 10 percent. For the purposes of the index, the ‘non-core’ categorization includes a mix of value added and opportunity funds though both of these styles are not currently included in the US index, and the European index only include value added.
Overall, core, value added and opportunity funds in Asia Pacific all provided a better return in the final quarter of 2014. The “All Funds” index was 3.6 percent, compared to 1.7 percent in the third quarter, and the opportunity funds index grew in total returns from 0.7 percent to 7.2 percent – this was the first time that closed end opportunity funds outperformed their counterparts since the last quarter in the previous year.
Japan Leading China and Australia
All three major Asia Pacific markets – Australia, China and Japan – improved between the third and fourth quarters last year and the return rate of Japanese funds increased from 2.2 percent to 7.9 percent. Chinese funds increased by 3.8 percent from 0.5 percent and Australian funds realized a total return of 2.8 percent in the last quarter of 2014.
Amelie Delaunay, Director of Research & Professional Standards at ANREV, said, “We are pleased to see that Asia Pacific has outperformed the US and Europe which is a big change compared to the previous seven quarters when the US was outperforming, reflecting an improvement in the performance of non-listed funds in some markets such as Japan. The outperformance is mainly due to some opportunity funds which realised gains from property sales.”
The latest GREFI report is the first full year version since the index was officially launched last April. Future releases of the index will seek to broaden the breadth of data covered, further improving the transparency of global non-listed real estate as an asset class and helping investors with their investment decisions.