# IRR Indices

The IRR Annual and Quarterly Indices measure the since inception internal rate of return of European closed end non-listed real estate vehicles.

The accompanying publication  provides breakdowns by sector strategy (single sector vs multisector) and regional strategy (single country vs multi country).

The IRR is computed on both a pooled return basis and an equally weighted basis. (arithmetic mean). Equity multiples are also available in the publication.

## Background

The IRR Index was launched as a consultation release in May 2018 following the success of the Historical Data collection project. The since inception IRR is measured net of fees and costs and represents IRR achieved by investor.

The IRR Annual index is published on the second Wednesday of May  each year, while the IRR Quarterly Index is published 11 weeks after quarter end.

The IRR Index is an unfrozen index which means that historical data can change with future updates.

## INREV Internal Rate of Return (IRR) Quarterly Index

Published on 15 Dec 2020

The IRR Index measures the since inception internal rate of return performance of European closed end non-listed real estate vehicles. Performance is measured net of fees and costs, and is computed on both a pooled return basis and an equally weighted basis.

## Internal Rate of Return (IRR) Annual Index

Published on 12 May 2020

The IRR Index measures the since inception internal rate of return performance of European closed end non-listed real estate vehicles. Performance is measured net of fees and costs, and is computed on both a pooled return basis and an equally weighted basis.

## Calculation methodology

IRR is calculated using the Internal Rate of Return computation engine developed by INREV.

### Performance calculation

The IRR, internal rate of return, is also known as a money-weighted return.

The since inception IRR (SI-IRR) for each vehicle is computed as follows:

$$f_0 + {{f_1}\over {(1 + IRR)}} + {{f_2}\over {{(1 + IRR)}^2}} + {{f_3}\over {{(1 + IRR)}^3}} + ... + {{f_n}\over {{(1 + IRR)}^n}} = 0$$

Where:

$$f_0 ... f_n$$

denotes the cash flows for the period 0 through to period n (positive values for inflows and negative values for outflows).

### Pooled return

The pooled return represents the weighted IRR by pooling the cash flows of all funds of the same vintage, thus, larger funds have bigger impact on aggregates.

The pooled return IRR Index per vintage is computed as follows:

$$f_0 + {{f_1}\over {(1 + IRR)}} + {{f_2}\over {{(1 + IRR)}^2}} + {{f_3}\over {{(1 + IRR)}^3}} + ... + {{f_n}\over {{(1 + IRR)}^n}} = 0$$

Where:

$$f_0 ... f_n$$

denotes the cash flows for all vehicles of the same vintage over the period 0 through to period n (positive values for inflows and negative values for outflows).

### Arithmetic mean

The arithmetic mean represents the average IRR for funds of the same vintage on an equally weighted basis by taking the individual IRRs of each fund and then computing the arithmetic mean of these funds.

The arithmetic mean IRR per vintage is computed as follows:

$${1\over {m_j}} \displaystyle \sum_{i=1}^{m_j} {IRR_i}$$

Where:

$$IRR_i$$

is the IRR for fund i

$$m_j$$

is the number of funds for vintage j

Further information about the INREV IRR Annual Index and the INREV IRR Quarterly Index can be found in the Index Guide, for more information about Performance Measurement visit the INREV Guidelines on Performance Measurement.

## INREV Index Guide 2019

Published on 14 May 2019

## Data collection

Data is collected via the INREV Data Platform, where users are able to register their vehicles and provide  quarterly financial data. The system runs a number of validations to ensure the quality of the data received. Users are asked to approve data before submission to INREV.

### How is data validation carried out?

The validation process includes three major steps:

1. Systems based validation – the system uses rules-based algorithm to validate data.
2. Member approval – the member needs to approve information before submission to INREV
3. INREV verification – the INREV team verify information before inclusion to the database

### How will data confidentiality be managed?

INREV will not disclose or share any fund level performance data calculated.
INREV will only use performance data in a composite, where the vehicle and the manager are not identifiable.

## FAQ

### General Questions

1.    What are the IRR Annual Index and IRR Quarterly Index?
The IRR Annual Index and Quarterly Indices measure the since inception internal rate of return of European closed end non-listed real estate funds. Performance is measured net of fees and costs.

The IRR is computed on both a pooled return basis and an equally weighted basis. (arithmetic mean)

2.    Do you have to be an INREV member to be part of the index?
Data contribution to the IRR Annual Index and IRR Quarterly Index is on a voluntary basis, both members and non members of INREV can provide data for the Indices.

Although membership is required to be able to read INREV Index publications and use the Fund Level Analysis Tool.

3.    Who can join the IRR Annual Index and the IRR Quarterly Index?
Fund managers with a fund investing in Europe can join the IRR Annual Index and Quarterly Index by delivering their fund data via the Data Platform

No fees are requested to participate in the Index.

4.    Can we see the individual fund IRR data available in your platform?
No, performance data is only available  in aggregate form. Individual fund performance data is never disclosed and not accessible by any external party.

5.    How can we join the INREV Index?

### Index specifications

1.    What are the criteria for INREV IRR Index inclusion?

The INREV IRR Index includes the following:

• Funds that have provided full historical cash flows since inception and the latest NAV.
• Closed end funds.
• All styles: , core, value added and opportunity.
• Institutional funds, target >50% institutional holding
• Commingled funds, target >2 investors.
• Funds invested in Europe, >90% of GAV invested in European real estate
• The IRR Annual Index includes annually, bi-annually and quarterly valued vehicles
• The IRR Quarterly Index includes quarterly valued vehicles

2.    Is the index frozen or unfrozen?
The IRR Annual and Quarterly Indices are unfrozen, which means that historical data can change with future updates.

3.    Can this index be used for derivatives?
The INREV Index cannot be used for derivatives, due to the Benchmarks Regulation (BMR) which entered into effect on 1 January 2018.

4.    What type of data are the index results based on?
The Index results are based on fund level data that is provided to INREV directly by fund managers. INREV does not use publicly available information, and both members and non members of INREV can provide data for the Indices. Due to tight reporting deadlines, some data, e.g., quarterly NAV, might be provided on a provisional basis for a given quarter and will be finalised next quarter.

The Annual Index includes annually, bi-annually and quarterly valued vehicles.

The Quarterly Index includes only quarterly valued vehicles.

5.    What happens when a member stops contributing data, would their fund data remain in the index?
Funds must deliver complete data since inception of the fund. If a member stops providing data for the index, it will no longer be included in the IRR index publication.

6.    What is the frequency of data reported in this index?
IRR Annual index includes funds that are reported on a quarterly, semi-annual and annual basis.

IRR Quarterly index includes vehicles that are reported on a quarterly basis.

7.    What are the confidentiality rules for this index?
Performance is shown only when the sample size includes at least three vehicles from three  different managers. Quartiles and the interquartile range are displayed only when the sample size includes four  or more vehicles. Performance is included only when a vehicle has at least one year of cash flows.

8.    What is done regarding currency conversion when calculating returns?
To calculate aggregate returns, a local currency methodology is used. All figures that are reported in currencies other than the Euro  are converted a single exchange rate – First day of the publication year for the IRR Annual Index and first day of the publication quarter for the IRR Quarterly index.

This ensure no currency effect is taking place at a fund level. Please note that the currency fluctuations that take place at property level are embedded in the fund reported values and outside scope of local currency conversion.

9.    Does INREV collect historical data?
Funds must deliver complete data since inception of the fund.

The Research and Market Information team can support and facilitate historical data collection. To provide data, please contact data@inrev.org

10.    How is data collected?
Data is collected via the Data Platform, where members are able to update their funds using a user-friendly interface. The system runs validations to ensure the quality of the data received.

Members are asked to approve data before submission to INREV.

11.    When should we provide and update the data?
Annual-Data collection starts immediately after a year has ended for a period of up to 12 weeks.

Quarterly-Data collection starts immediately after a quarter has ended for a period of up to 6 weeks.

12.    How is data validation carried out?
The validation process includes three major steps:

• Systems based validation – the system uses rules-based algorithm to validate data.
• Member approval – the member needs to approve information before submission to INREV
• INREV verification – the INREV team verify information before inclusion to the database

13.    When was the Index launched and when are the results published?
The Annual Index was launched as a consultation release in May 2018 and is now published on the second Wednesday of May of each year.

The first IRR Quarterly Index was published in June 2018 and is now published 11 weeks after quarter end.

14.    Are the IRRs quoted on a net or gross basis?
IRRs are quoted on a net basis.

15.    What currency is required for data submission?
Financial data for the funds need to be reported in the reporting currency of the fund.