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The first pan-European index for unlisted real estate funds is set to hit the market next year.
Unfortunately, it will not give investors everything they need. One of the major barriers to entry for institutions looking at the private real estate funds market has been the lack of benchmarks. In the UK the HSBC/Association of Property Unit Trusts index of pooled property vehicles has been running for nearly 20 years but Europe as a whole has lagged behind.

How the indices will work The new INREV indices will initially be calculated on an annual basis, but ABN AMRO’s Philip Rose, co-chairman of INREV’s performance and benchmarking committee, says he expects a number of markets to move “fairly quickly” to six-monthly reporting. The ultimate goal is to have all funds reporting on a quarterly basis, to bring them in lines with best practice in other asset classes.
The indices will cover most major real estate markets in Europe and many of the smaller ones. Indices are planned for Austria, Belgium, France, Germany, Ireland, Italy, The Netherlands, Spain, Switzerland and the UK. Whenever possible, INREV also hopes to provide sub-indices for property sectors including office, retail, industrial and residential.
There will also be separate indices for institutional funds and retail investor funds.
INREV is also working towards management style indices, classifying funds as core, value-added and opportunistic, which will allow investors to see whether the higher fees charged for core-plus and value-added funds are justified by performance.
The main index will be the pan-European all funds index: a barometer for the performance of the entire European private real estate funds industry.
Investment Property Databank will be responsible for supervising data collection, confidentiality and the index calculation process. The INREV indices will be released at INREV’s first conference in April.

The European Association for Investors in Non-listed Real Estate Vehicles (INREV), is to launch a pan-European index for private funds as well as a series of indices for individual countries, which aims to provide investors with the transparent and accurate means to compare funds across Europe.
“The new INREV indices are the clearest sign to date of the maturing market for non-listed real estate investment in Europe,” says ABN AMRO’s Phillip Rose, co-chairman of INREV’s performance and benchmarking committee. “The indices are being launched because investors want to invest across geographies and because there is now a critical mass of quality, transparent vehicles to make an index possible.
“Without a benchmark you can’t tell whether you’ve outperformed or underperformed. In addition to expanding the investor universe, the INREV indices will increase information transparency, cross-market comparisons and investment efficiency.”
This will only be a partial solution to investor’s problems as the indices will not rank individual fund performance, as the fund sponsors contributing data to the indices have demanded that all information be treated as confidential.
So while potential investors in a Belgian retail fund, for example, will be able to see how unlisted funds investing in Belgium have performed and - if enough data is available - how funds investing in Belgian retail have performed, they will not be able to see how an individual fund has performed compared with its peers. The lack of performance ranking of individual funds also prevents investors from seeing how all the vehicles run by an individual fund manager have performed.
Rose comments: “There is a wide variance of types of fund within the INREV indices so it is very hard to compare like with like and there are few funds which are directly comparable to one another. A ranking of funds in one country would not be able to take account of the different risk/return structure of each fund. In the fullness of time I think there will be the ability to list fund performance, but it will not be for a few years.”
The UK APUT indices show the performance of individual funds as well as grouping them according to type (balanced funds/specialist funds etc) so investors can rank them. APUT and INREV have joined forces to promote increased transparency, and are considering developing the APUT code of practice to encompass a far broader range of funds.

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