Timo Löyttyniemi

During his six years on the INREV Management Board, Timo Löyttyniemi, Managing Director of the State Pension Fund (VER), Finland, has seen INREV introduce a host of game-changing initiatives. IQ caught up with him as he approaches the end of his term on the INREV Management Board for his assessment of the impact the organisation has had on the industry.

Consistent, timely and relevant information are, says Timo, critical tools for an investor. There was a time when the nonlisted real estate funds industry had limited information flow. But the rapid and significant growth in investor appetite for non-listed real estate funds over the last decade has been mirrored by an explosion in the level of information and standards available within the industry.

INREV-Compliant

Timo believes INREV has been the driving force behind this evolution. In his view, INREV’s initiatives have delivered huge benefits to the industry as a whole, as well as to the pension fund for which he has responsibility. “At the State Pension Fund all our real estate investment is indirect so tools such as the INREV Guidelines and the other standards it has developed have been of great help to us.”

At the State Pension Fund all our real estate investment is indirect so tools such as the INREV Guidelines and the other standards it has developed have been of great help to us.

The term “INREV-compliant” is, he says, a common point of reference for many funds these days. It underlines the growing maturity and professionalism of the industry. For Timo, it also demonstrates the practical advantages of a more rigorous, transparent and consistent approach to fund reporting and benchmarking. “Now we can easily compare funds,” he adds. Pinpointing specific initiatives, Timo highlights the INREV Vehicles Universe database and Due Diligence Questionnaire. Both improve the efficiency with which his team can reach informed decisions because they “help us to focus on the answers to key questions as opposed to finding the sources for those answers.”

Evaluate Own Performance

INREV’s benchmarking and research are areas that Timo thinks have made a really important contribution to the industry. They provide investors and fund managers with a level of knowledge that enhances the quality of both products and performance.

“We have been using INREV’s benchmarks for European fund performance for three years. Mostly we use the INREV Annual Index for this. We have respect for this index and the professionalism behind it. I hope INREV can continue to manage the selection issues. It’s very important to us that the index contains as many funds as possible and that these funds remain in the index and are measured consistently on an annual basis.

We need to see the good and the bad, because this helps to give us a complete picture. An index helps us to evaluate our own performance.

Similarly, he singles out the series of country-specific investor research – such as the Investor Universe Finland Survey – which, in the case of his own pension fund, have provided a very helpful benchmark for comparison with other funds in the market. Timo sees the INREV Quarterly Index in the same light; and he says that these sorts of initiatives are the key to further strengthening the industry in the future.

He also references INREV’s recent European Real Estate Debt Fund Study as an example of valuable insight that helps investors and fund managers determine their investment strategies: “We’ve been exploring real estate debt funds and this study is timely and up-to-the-minute. It has given us a broad, objective overview of this exciting but largely un-tested area of the market.”

Bridging the Gap

With the growing internationalisation of investors and funds, the work that INREV does in bridging the gap between different geographical markets is another area that Timo thinks will continue to deliver substantial advantage for its members. Again, his own experience of this has been positive, as he explains: “We entered the Asian market three to four years ago. Early on there was little reliable information about the region. However, INREV and ANREV have developed a much closer working partnership over the last few years, which has resulted in the outflow of very useful information for new investors in this market.”

From here, he turns his attention to the regulatory environment. There is, he says, a pressing need for the industry to keep abreast of major European regulations that could affect it and he welcomes the steps that INREV has taken to become more active in this area. He believes that the level of regulation is only likely to increase, but adds that INREV must work out just how far it can and should exert its influence going forward.

Setting the Tone

Ultimately though, Timo circles back to the INREV Guidelines. He believes these are central to setting the tone for the future. In an environment where society as a whole increasingly demands that individuals, corporations, industries and governments can be held up to public scrutiny, it is imperative that the industry is not found wanting: “As an industry we need to be more transparent. It’s about behaving appropriately and being prepared to share information. We may see financial crises in the future but we don’t want the non-listed real estate funds sector to be implicated as the cause of these.”