Library

This study examines management fees and costs. There are two parts to the study: the European part and the global comparison.

Europe

INREV's Management Fees and Terms study provides an overview of the fees, costs and total expense ratios (TERs) of European non-listed real estate funds. This part has been conducted on a regular basis (but not annually) since 2007.

Global Comparison

The Management Fees and Terms Global Comparison Study compares the fees and costs and, where applicable, total expense ratios (TERs) of non-listed real estate funds in Europe, Asia Pacific and the US. This part has been conducted on a regular basis (but not annually) since 2007. The global comparison has been conducted since 2010.

INREV's Business Plans are produced annually for three-year periods, describing the priorities for the next three years, actions, market trends, results of the member survey, and a review of the previous year.

INREV's Annual Report and Financial Statements are available since 2009 and provide the Chairman's Report, Mission, History, Association Stucture, and describes INREV's platforms, committees, membership status, activities, and financial report.

This report aims to provide insight into current market practices in investor reporting across non-listed real estate vehicles investing in Europe, and specifically the extent to which reporting complies with the requirements and recommendations of the INREV Guidelines.

In later years, this report has been titled 'Review or Reporting Best Practice'.

Non-listed core real estate funds offer the diversification benefits of real estate as part of a multi-asset portfolio and can provide investors with an accessible and transparent route to gain exposure to the sector. They are a maturing part of the European real estate industry that is now launching its second generation of funds. The first generation of funds faced the extreme challenges of the Global Financial Crisis (GFC) head on; an experience which has resulted in a refined and reconsidered fund product for the new cycle. This paper highlights both the qualitative and quantitative benefits of core real estate funds in Europe and how they can support the investment requirements of investors. The industry offers a wide range of products to match risk/return requirements, but this report focuses on core non-listed real estate funds as a natural entry point for investors that are looking for real estate exposure.

This is the second in a series of academic papers that INREV will publish. Going forward INREV plans to invite the academic community to research the European non-listed real estate market in more detail.

Over the past decade, the European institutional non-listed real estate fund market has matured into an investment category that consists of 472 funds, representing €227 billion of gross asset value. But maturity cannot be measured by numbers alone. In this paper, we examine the recent evolution of the non-listed fund market with respect to transparency and performance. In line with the private equity literature, we analyse the returns and fees that investors face when investing in non-listed real estate funds. Our results show that non-listed real estate funds have delivered moderate but stable total returns over the past thirteen years. Compared to Europe’s public real estate market, the non-listed core fund index yielded an average return of 5.2% which is more than 2.0% lower than the public real estate index return, but at a risk (standard deviation) of 9.7%, which is less than a third. The total fee load of non-listed real estate funds (2.2%) is low compared to private equity (7.0%). This fee could be ened back by selecting the funds that rank highest on their sustainability performance, as our analysis shows a 2.8% return spread between the top and bottom Global Real Estate Sustainability Benchmark (GRESB) deciles. A large fraction of this return pattern, however, relates to the associated variation in fund leverage. Hence, transparency regarding non-listed fund characteristics is key and although the market is not there yet, it is gaining momentum and relevance.

The Debt and Derivatives Disclosure Notes include examples of tables that can be used to present information on financing and hedging arrangements to investors. Large parts of the information to be disclosed covers existing fund GAAP requirements, but there may be other items required. The Notes suggest to disclose the information both in the year end accounts and in quarterly management information for investors.

The topics covered by the Notes are:

Loans and borrowings

• Analysis by category (debt from credit institutes, shareholder loans etc.)
• Analysis of maturity for each loan
• Analysis of interest and fair value for each loan
• Overview of quantitative covenants applicable for loans and borrowings

Foreign Currency

• Analysis of foreign currency exposure

Derivative financial instruments

• Analysis of derivative financial instruments   Interest rate sensitivity analysis
• Analysis of foreign exchange derivative financial instruments
• Foreign exchange sensitivity analysis

The full document can be downloaded in a Word and Excel format.

Example from INREV Guidelines.

The INREV Public Affairs Committee's response to the consultation to encourage informed consideration of non-listed property funds as a long-term investment.This report explores the impact of regulatory change on long-term investing strategies and on the real economy.

Long-term investment enhances the productive capacity of the economy and often has wider public benefits, since it generates greater returns for society as a whole by supporting essential services and improving living standards. Public debate is currently focused on how to encourage long-term investment in Europe.