Europe’s Property Funds Performing Strongly in Challenging Circumstances

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Europe’s Property Funds Performing Strongly in Challenging Circumstances

 

Region’s real estate market is robust, despite Brexit and pressure on returns


October 2019, LONDON—Europe’s property funds are benefiting from enough positive factors being at play, both regionally and globally, to outweigh the challenges, according to the latest issue of The Cerulli Edge—European Monthly Product Trends Edition.


Cerulli Associates, a global research and consulting firm, says that the influences favoring property funds include the continuing squeeze on interest rates and increasingly unsettled geopolitics. However, Brexit is one of the blots on the European real estate investment landscape.


“Low borrowing costs have spurred construction and created a range of new opportunities, while the durability of brick-and-mortar assets has reassured investors concerned about volatility returning to global stock markets,” says Fabrizio Zumbo, associate director, European asset management research, at Cerulli.


By August 2019, net new flows into property funds in Germany, Luxembourg, and France had either almost reached or surpassed those gathered in the whole of 2018. Data shows that the number of funds closing after a capital raise fell by more than a quarter in 2018, but this, says Cerulli, may be the result of managers raising larger, if fewer, funds.


In some instances, returns are under pressure. To achieve the premium demanded by investors, managers may need to use their expertise to oversee, improve, or reposition assets.


Brexit has hit the U.K. market hard. Since 2015, assets under management in U.K. real estate have fallen by 30%. Over the same period, the other top nine European markets have seen their collective assets rise by 32%.

OTHER FINDINGS:

  • Following consecutive monthly net inflows since the beginning of the year, the upward trend in Europe’s exchange-traded fund (ETF) market ended in August, with the sector experiencing net outflows of €10.2 billion (US$11.3 billion) during the month, notes Cerulli. Equity ETFs were responsible for the outflows, with withdrawals amounting to €13.2 billion. All other asset classes posted net inflows during the month.
  • Bond funds continue to dominate in Europe, with net new flows of €23.8 billion in August. Equity funds suffered net outflows of €11.5 billion during the month. European equity has been the worst-performing sector year-to-date, with net outflows of €19.6 billion. Cerulli believes that the European equity market is increasingly being driven by sentiment rather than fundamentals.
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NOTES TO EDITORS:
These findings and more are from: The Cerulli Edge—European Monthly Product Trends Edition, October 2019 Issue.

 

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