Commercial property fund investors across the UK have lost an average of 11.4% over the past five years, according to research by housing investment and shared equity mortgage provider, Castle Trust.

The trust analysed the returns from 42 funds in the IMA property sector and found that the best return from the 14 UK-focused funds over five years was only +1.0%. The worst return stood at -26.6, with the total average loss for the sector at the end of the five-year period at 11.4%.

The trust also conducted a survey of 375 financial advisers and found that only one-third (34%) are expecting to see increased interest in 2013.

Castle Trust chief executive officer, Sean Oldfield said: “Residential property has historically been a notoriously inaccessible asset class for investors, principally only for buy-to-let investors. Property investment for most people means investing in commercial property funds although many investors think they are gaining exposure to residential property through them.

“Property funds are not as liquid as they may seem. The reality is that investors try to sell when prices turn down, at which point they are locked in and then get the prices that can be achieved for the properties when allowed out. The idea that an open-ended fund can make illiquid assets liquid is misleading, as anyone who tried to sell a holding in a commercial property fund in 2008 will be aware.”

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