UK – Property was the best performing asset class in terms of returns for the second year running, returning an average of 6.7% in 2001 compared to –13.2% for equities, says the Investment Property Databank’s (IPD) annual survey of the UK real estate market. However, pension funds were the worst performing fund type, whose annual return rate last year of 6.2% fell below the all funds’ average of 7%.
IPD says that though investments in real estate outperformed all other asset classes last year, 2001’s returns were nonetheless unimpressive if looked at in isolation. But the long term picture is more encouraging for the asset class.
It continues to be the best performing type over three and five years, with IPD predicting it will take over this year from equities as the best performer over 10 years as well if property returns remain at 5% or more and equities don’t exceed 15%.
Unitised and life funds continued to outdo pension funds in terms of investment returns, with 7.5% and 6.9% respectively compared with pension funds’ 6.2%, and the rise of property companies is also taking business away from them, says IPD. Property companies’ returns reached 7.1% last year.
However, Fiona Sweeney, a pensions manager at Hermes Property Asset Management, questions the validity of IPD’s research, suggesting that its universe is too narrow and the results might be different if indirect property investments were taken into account.