LONDON - Real estate equity funds dominated Lipper's ranking of top-performing funds in August, as expectations of an impending property market recovery prompted a rally in European property stocks. Of the top 20 UK-registered equity funds ranked by fund tracker Lipper, a unit of Thomson Reuters, 11 were real estate funds of which nine are invested in the UK or Europe.

The Scottish Widows Investment Partnership (SWIP) UK Real Estate fund was the number one ranked fund in August with a growth of 23.64 percent, Lipper data showed, outperforming the FTSE UK property stocks index .FTNMX8730, up 17 percent.

The fund had fallen 47.74 percent over the past three years, Lipper data showed, amid a steep downturn in real estate markets that was exacerbated by the global financial crisis.

Asset prices have stabilised over the summer and things are definitely looking better now, SWIP UK Real Estate fund manager Chris Bamberry told Reuters, adding he expects UK property stocks to rise steadily for the next 2-3 years.

British commercial property values rose 0.2 percent in August, the first rise in 26 months after plunging more than 44 percent since their June 2007 peak, data showed on Monday.

Will capital values improve by 10-12 percent over the next two or three years? I would think so, and that justifies the rise in share price, he said, noting the gap between yields and borrowing costs remained high, benefiting buyers.

Bamberry said his top picks include European industrial giant Segro, which he expects to dominate the sector after its takeover of rival Brixton, and London & Stamford Property due to its exposure to prime UK real estate.

He is underweight on the UK's biggest mall owner Liberty International, due to its high capex needs and upcoming rental reviews, which he expects will put pressure on the share price. Other top real estate performers include the SSgA EMU Index Real Estate, Morgan Stanley European Property, and Henderson HF Pan European Property Equities funds. (Reporting by Daryl Loo; Editing by Andrew Macdonald) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

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