The latest market analysis from Alliance Fund looked at data from 46 of the nation’s most prominent real estate funds to reveal which has seen the largest annual rate of growth, as well as which are offering the best returns to investors.
Real estate funds come in all shapes and sizes, allowing for collective investment from numerous investors which are pooled together to purchase real estate assets, most commonly residential and commercial real estate.
This collective approach to real estate investment offers a number of advantages including the ability to spread risk, access to a greater diversity of portfolio opportunities and the foundation of professional fund management providing a more secure, hands-off approach.
The analysis by Alliance Fund shows that currently, the average NAV across 46 of the nation’s most established real estate funds sits at £1,272m, with M&G Secured Property Income Fund sitting top of the table with a NAV just shy of £4,674m.
On an annual basis, the average NAV value of these funds has grown by 11.1%, however, some have seen a far higher rate of NAV growth and no more so than the CBRE UK Long Income Fund, up 85.1% in the last year.
But it’s not just the funds themselves that are benefitting from strong market performance, with the analysis by Alliance Fund showing that the average investor is seeing annual returns of 11.5% when utilising a real estate fund as an avenue of investment.
Those investing via Nuveen Real Estate UK Retail Warehouse Fund have seen the strongest returns at 32.3% annually.
Iain Crawford, CEO of Alliance Fund, commented: “From residential developments to retail outlets, warehouses, sports grounds, listed buildings and everything in between, real estate funds provide the opportunity for investors at all levels to create an incredibly diverse, bespoke portfolio while minimising risk in the process.
"Although all investments carry an element of risk, the average return provided when investing in a real estate fund has been robust, to say the least, and the space is growing by the day to ensure investors have even further choice when investing.
"There are already some firmly established funds out there, but we’re also seeing the evolution of this avenue of investment, with many challenger funds bringing something new to the sector.
"Alliance Fund is just one such fund disrupting the sphere of real estate fund investment as, unlike many traditional funds, we do not invest fund capital into third-party investments.
"We take an end-to-end approach by investing only in activities that we control, allowing us to reduce risk as the funder, developer and constructor.
"As a result, we can commit to delivering a substantially higher return than the norm even once the initial costs are subtracted and on average, our existing investors will enjoy minimum returns of 24% on their investment in 2023.
"In reality, this far higher margin is actually a worst-case scenario and the more capital we raise the lower the total expense ratio becomes.
"It’s certainly an exciting time to be operating within the sector and we look forward to not only seeing what comes next but leading the charge where innovation and growth is concerned.”
