2 August 2016, Amsterdam – Investors are reaping the benefits of scale and diversification from investments in funds of funds which delivered a record total annual return of 18.7%.
The latest Fund of Funds Study 2016, jointly published by INREV and ANREV, reveals the strongest performance for funds of funds to date, continuing a three-year upward trend. It highlights the relative attractiveness of these vehicles despite earlier indications from investors that they were their least preferred option in terms of capital allocation to real estate*.
Though performance was not equal across vehicle size, geographic region, style, structure and vintage, there was a consistent improvement in performance for virtually all types of funds of funds. Notable performances were achieved by large vehicles (with NAV in excess of €300 million) at 22.1%; core funds at 20.4%; open end funds at 19.4%; and funds targeting a global strategy at 26.0% – which represents a second consecutive year of double-digit growth.
Scale, style, structure and strategy
The study also reveals general patterns and characteristics of funds of funds, which indicate potentially interesting trends about the changing nature and management of these vehicles.
Core vehicles make up the lion’s share of the combined INREV and ANREV universe by value, representing 71.8% of the total NAV for funds of funds. Likewise, there is a dominance of open end vehicles which currently account for 71.4% of total NAV, while vehicles following a global or European strategy command an overwhelming 86.2% of total NAV. On average, core vehicles have lower blended gearing levels of around 41.4%, as well as higher average capital commitments at €32.2 million of equity compared with €19.5 million for value added and €18.7 million for opportunity funds. Similarly, core vehicles typically invest both in more funds (16 on average versus eight for value added and nine for opportunity), and in more managers (12 on average versus eight for value added and seven for opportunity).
Commenting on the study, Henri Vuong, INREV’s Director of Research and Market Information said: “Seemingly, this report highlights the predominance of large, core funds of funds focussed on global and European strategies. It also sheds light on subtle changes in scale and structure that suggest greater alignment between investors and fund managers. This is all reflective of a general market sentiment that’s tilting more and more toward increased control of risk and greater transparency. It’s a mood that we believe will only intensify in the continuing climate of economic and political uncertainty. INREV’s response is to continue to drive greater standardisation of industry best practice, reporting and performance benchmarking, globally.”
*Investment Intentions Survey 2016 (INREV, ANREV, PREA)
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For further information, please contact:
Justin St Clair-Charles, inrevteam@firstlightpr.com | +44 (0) 7769 644 059
Notes to Editors
About the Funds of Funds Study 2016
The fifth edition of the Fund of Funds Study provides insights on performance, target region, style, structure and other characteristics. For the second time, the study was a joint initiative between INREV in Europe and ANREV in Asia Pacific.
The study includes responses from the combined INREV and ANREV fund of funds Universe of 65 vehicles with a total NAV of €9.6 billion. However, performance figures are based on a reduced sample of 25 funds of funds with a total NAV of €6.5 billion, which is 67.5% of the total value of the universe.
All performance figures are stated in local currency. Sample size for the study varies year-on-year so historical comparisons should be treated with caution.
About INREV
INREV, the European Association for Investors in Non-listed Real Estate Vehicles, was launched in May 2003 to act for investors and other participants in the growing non-listed real estate vehicles sector. The non-profit association is based in Amsterdam, the Netherlands. INREV aims to create a forum for the sector and increase the transparency and accessibility of non-listed vehicles, to promote professionalism and clarify best practice and to share and spread knowledge. INREV currently has 389 members drawn from leading institutional investors, fund managers, banks and advisors across Europe and elsewhere. In 2015, 40 new members joined INREV. For further information, please visit https://www.inrev.org/