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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 sixmonthly
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 Nonlisted
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.
Aranking 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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