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Retail Woes Mean These Are The UK’s Worst-Performing Institutional Funds

Grosvenor's Liverpool One shopping centre

Some of the UK’s largest institutional investors have suffered plunging returns in the past 12 months in funds heavily exposed to the beleaguered retail sector.

According to the latest MSCI/AREF UK Quarterly Property Fund Index, investors including Grosvenor, Standard Life Investments and Nuveen Real Estate have taken big losses on funds that specialise in shopping centres and retail parks.

Here are the funds that have suffered the lowest returns in the 12 months to the end of June.

Nuveen Real Estate UK Retail Warehouse Fund

Nuveen’s retail warehouse fund was the worst performing in its index in the past 12 months, with an investment rate of return of -17.4%, according to AREF and MSCI. It returned -6% in the past quarter alone. In spite of this, in the past nine months its net asset value rose 7% to £510M. It owns 13 retail parks across the UK, the largest of which are the Manchester Fort Shopping Park and the Brewery in Romford. It has £370M of debt.

The Hercules Property Unit Trust

The British Land-managed Hercules Property Unit Trust produced a return of -15% over the past 12 months, and saw the industry's worst returns in the second quarter of 2019 at -7.3%. It owns 11 retail parks across the UK, the largest being the Glasgow Fort Shopping Park. Its net asset value dropped 18% in the nine months to the end of June to £735M. It has £514M of debt.

Standard Life Investments UK Shopping Centre Trust

Standard Life’s shopping centre fund produced a return of -13.5% in the 12 months to the end of June, and -4.9% in the quarter. AREF did not have information on its NAV movement. It owns five shopping centres across the UK, including a 59% stake in Brent Cross in North London, the redevelopment of which has been delayed due to the flurry of negative news from retailers.

Standard Life Investments UK Retail Parks Trust

Standard Life’s retail park fund performed almost identically to its shopping centre vehicle, producing a one-year return of -13% and a quarterly return of -4.6%. Its net asset value fell 26% to £383M in the nine months to 30 June. In owns six retail parks in the south and midlands of the UK, the largest of which is the Ladymead Retail park in Guildford. It has no debt.

Grosvenor Liverpool Fund

This fund contains one asset: the 2.4M SF Liverpool One shopping centre developed by Grosvenor in 2008. The Abu Dhabi Investment Authority is its biggest investor; in 2016 it paid £300M to buy a stake in the scheme that took its ownership to 65%. In the past year the fund has produced a return of -12%, with a quarterly return of -3.5%. In the past 12 months its NAV has dropped 13% to £485M. It has £400M of debt.

Nuveen Real Estate UK Shopping Centre Fund

Nuveen’s shopping centre fund has fared better than its retail parks fund in terms of returns, making a -11.6% return in the past 12 months, and a -4.8% return in the past quarter. It owns just two assets: a 33% stake in the Bullring shopping centre in Birmingham and a 25% stake in the St James centre in Edinburgh. It suffered the biggest drop of any of the retail funds in terms of NAV decline in the past nine months, a 35% fall, precipitated by £195M of debt.

Lendlease Retail Partnership

The Lendlease Retail Partnership owns one asset, the Touchwood Shopping Centre in Solihull in the Midlands. That centre fared better than the assets in the other specialist retail funds indexed by AREF and MSCI, producing a return of -7% for the 12 months to June at -1.6% for the quarter.