Cross-border European property funds recorded a fifth consecutive quarter of positive returns, delivering 1.2%, despite ongoing eurozone debt contagion concerns, according to the IPD pan-European Pooled Funds Index.

Reliable income returns across the portfolios have kept overall returns positive, despite values suffering due to the general uncertainty concerning the eurozone. Specialist funds, which outperformed balanced funds for the second consecutive quarter, almost entirely due to their income streams, maintained an income return of 1.5%, while balanced funds recorded 0.7%.

The effects of gearing and cash holdings in the portfolios have also been mixed. 'Since the unexpectedly low eurozone inflation figures, around 2.5%, for the second quarter, it is unlikely that the European Central bank will raise interest rates, already at 1.5%,' said Nassos Manginas, director of Global Client Services at IPD following the release of the index.

He added: 'This has had a positive effect on the considerably higher leveraged specialist portfolios - specialist funds have an average gearing to GAV of 42.4%, while balanced funds 30.6% - while the larger cash holdings of the balanced portfolios have acted as a drag.'