Retail investors pull US$13 billion from property funds in Europe
Mom and pop investors yanked 11.44 billion euros (S$16.7 billion) in the year through March from products domiciled in the region, according to data compiled by Morningstar, 20 per cent more than in the previous 12 months. Monthly euro-denominated real estate fund flows have been negative since February 2023, said the data provider, which tracks open ended and exchange traded products.
Commercial real estate can take years to buy and sell and is valued periodically, meaning funds' reported valuations can be slow to adjust in periods of uncertainty. The can encourage investors to pull cash from vehicles before the assets are fully marked down.
Many also have significant exposure to office properties, the value of which have further suffered from shifting working patterns and more stringent environmental regulations. That's made it harder for fund managers to return capital to investors that want out, prompting some to close.
St James's Place, a UK wealth manager, is winding down its real estate funds after significant withdrawals while Aegon closed funds after they failed to grow in size as much as expected.
Goldman Sachs Group shuttered a global real estate securities fund last month. The product had lost money for investors over five years, according to its annual report.
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Real estate has also been losing out to other asset classes seen as offering better or more secure returns, including infrastructure and private credit. Investors pulled about 500 million euros from property funds managed by DWS Group's alternatives business in the first quarter.
'European real estate will continue to be probably in slight outflow, given that we still have to get through the tail end of the notifications we received over the last 12 months,' chief executive officer Stefan Hoops said on a call with analysts last week. 'We are more optimistic on the future path.'
Hopes of a rebound in real estate values this year after central banks began to cut interest rates have so far not played out in many sectors. Hotel valuations in the US fell 2.8 per cent hit last month, according to researchers Green Street, as international tourism tumbled. The overall index was down 0.5 per cent.
European real estate funds now oversee about 156 billion euros compared with just under 200 billion euros in February 2023, according to Morningstar. BLOOMBERG
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