ODCE Indices

The ODCE Annual and Quarterly Indices measure the performance of pan-European open end diversified core equity funds on an annual and quarterly basis.

The Index is wholly comprised of open end core commingled equity real estate funds that have a strategy to invest across pan Europe and across multiple sectors. Funds must comply with a strict eligibility criteria for four consecutive quarters to be included in the index. 

Background

INREV European ODCE Index was launched in April 2019 as a consultation index to allow us to present results and gather feedback from the wider industry, including investors and new or existing contributors.

Performance is measured net of fees and other costs, and represents the aggregate investor return

The European ODCE Index was launched in 2019 and quarterly publication is published 8 weeks after quarter end.

Latest publications

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European ODCE Quarterly Index  

Published on 25 Aug 2020

The Index is wholly comprised of open end core commingled equity real estate funds that have a strategy to invest across pan Europe and across multiple sectors. Funds must comply with a strict eligibility criteria for four consecutive quarters in a row to be included in the index. 

European ODCE Annual Index  

Published on 28 Apr 2020

The Index is wholly comprised of open end core commingled equity real estate funds that have a strategy to invest across pan Europe and across multiple sectors. Funds must comply with a strict eligibility criteria for four consecutive quarters in a row to be included in the index.

Calculation methodology

Performance for the ODCE Index is calculated using the Modified Dietz methodology. This methodology is used to calculate annual and quarterly net asset value fund performance.

The total return measures the performance over a specific period and does not include projections to the end of the fund’s life.

The total return is computed as follows:

$$ NAV_t - NAV_{t-1} - contributions + redemptions + distributions \over NAV_{t-1} + TwdC - TwdR - TwdD $$

The capital growth is computed as follows:

$$ NAV_t - NAV_{t-1} - contributions + redemptions \over NAV_{t-1} + TwdC - TwdR - TwdD $$

The distributed income return is computed as follows:

$$ ∑distributions \over NAV_{t-1} + TwdC - TwdR - TwdD $$

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

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Data collection

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

How is data validation carried out?

Data validation is carried out in a three step process:

  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 verifies information before inclusion to the database

How is data confidentiality managed?

INREV does not disclose or share any fund level performance data.

INREV only uses performance data in a composite, where the vehicle and the manager are not identifiable.  

What type of returns are measured on an index level?

Quarterly and annual performance is measured by time weighting returns over the measurement period. Income return, capital growth and total return are be calculated for the measurement period.

FAQ

General 


1.    What is the ODCE Index? 
The ODCE Index is fund level index which covers the performance of the Open End Core European institutional non-listed real estate funds taking part to the INREV fund level index.

2.    What is the ultimate goal of the index?
Mission: 
To be regarded as a relevant and informative measure of the performance of the institutional core diversified pan-European open end real estate vehicle market for the benefit of participants that invest, advise or manage within this peer group. 

Vision: To provide a professional standard of regular accessible reporting and analysis that develops the transparency, understanding, and contributes to the broader functioning of, the institutional marked-to-marked pan-European open end real estate vehicles through market cycles.

3.    Why has INREV launched this Index?
This Index was launched in response to member requests. Many questioned the absence of a European ODCE, especially considering the close collaboration with NCREIF and ANREV who offer regional ODCE indices in the US and Asia Pacific. This Index is also in line with our business plan priority to be the go-to-knowledge platform for European non-listed real estate industry.  

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

Although access to the INREV ODCE Index publications and the Analysis Tools are for members only.  

5.    Who can join the ODCE Index?
Fund managers with a fund investing in a pan-European open end diversified core equity fund can deliver their fund data using our Data Platform. No fees are requested to participate the Index. In addition, contributing funds need to commit to the transparency ambitions of the index.

6.    How can we join the ODCE Fund Index?
To join the INREV Index please contact data@inrev.org
 

Index specifications


1.    What are the criteria for ODCE inclusion?
To be eligible to be included in the INREV ODCE index, the fund must have following target strategy:

  • Institutional funds, >50% institutional holding
  • Commingled funds, >2 investors
  • Core, open end funds only
  • Funds targeting at least 80% of GAV in real estate
  • Funds with a pan-European strategy
  • Funds invested in Europe, > 90% of GAV invested in European real estate
  • Funds targeting at least 80% of GAV in office, industrial, residential and retail
  • Funds targeting at least 80% of GAV in stabilised assets
  • Funds targeting < = 40% leverage
  • Funds are valued externally at least quarterly
  • Funds are valued using the RICS, IVS or another mark-to-market valuation standard
  • Funds are audited annually
  • Up to date information is displayed on INREV Vehicle Universe
  • Fund must be named as a contributor to the index

Performance of an individual fund is only included in the index if the following thresholds are met for four consecutive quarters:

  • Diversification - <=65% exposure of GAV in a single sector or country
  • Leverage - <=40% actual fund leverage

2.    Does the ODCE Index contain all the relevant funds available?
At this stage INREV ODCE index includes all qualifying funds that submitted data via the INREV data platform. INREV is aware of a number of newly launched funds that satisfy the criteria and are  in touch with the mangers to include these funds in the near future. INREV is encouraging managers who have relevant funds that are not yet part of the ODCE Index, to reach out for further discussions on inclusion.

3.    What future developments of the index are planned in terms of transparency in the sector?
INREV are working together with the focus group to incrementally bring more information about the funds in the ODCE Index in a phased approach described below.

  • Phase I – adding country/sector breakdown on aggregate level, add accruals-based income returns on aggregate level
  • Phase II – disclosing individual funds country/sector breakdowns, disclosing individual fund NAVs, GAVs and Gearing levels
  • Phase III – add quartiles for performance and gearing metrics, add other agreed metrics, ODCE index moves online
  • Phase IV – potential to disclosure individual funds’ returns

4.    What future index developments are planned in terms of functionality?
Two key functionalities that are being developed are Fund to Asset Level Reconciliation and Performance Attribution. Those are very closely tied with the Asset Level Index. ANREV and NCREIF are also involved and are providing their expertise in the field.

5.    Is the ODCE Index frozen or unfrozen?
The ODCE Index is unfrozen, which means that historical data can change with future updates. 

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

7.    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. Due to tight reporting deadlines, some data, eg quarterly NAV, might be provided on a provisional basis for a given quarter and will be finalised in the next quarter. 

8.    What happens when a member stops contributing data, would their fund data remain in the index?
When a member stops contributing their data to the Index, this data will remain in the Index ending at the last date of contribution. As with other INREV indices, the historical data will be kept in the index to ensure continuity.

9.    Is the index equally weighted or value weighted?
ODCE Index is value weighted, meaning that large funds have a bigger impact on the performance of the index. 

10.    What are the confidentiality rules for this index?
Performance for any index or sub-index is reported only when the sample includes at least 3 funds from 3 different companies.

11.    Does INREV collect historical data?
INREV encourages fund managers to provide the historical and current data of their funds. The Research and Market Information team can support and facilitate historical data collection. To provide data, please contact data@inrev.org.

12.    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.

13.    When should we provide and update the data?
Data collection starts immediately after quarter  end for a period of up to 6 weeks.

Funds can provide estimates if final data are not available by the deadline. In this case, provided data can be amended after the publication date and will be restated in the next publication.

14.    How is data validation carried out?

  1. Data validation is carried out in a three step process: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

15.    What calculation methodology is used to calculate performance?
INREV ODCE Index measures net asset value performance of European non-listed real estate funds on an annual and quarterly basis. Performance is measured net of fees and costs at fund level.

Performance is calculated using the Modified Dietz methodology. This methodology is used to calculate annual and quarterly net asset value fund performance.
The total return measures the performance over a specific period and does not include projections to the end of the fund’s life.

The total return is computed as follows:

$$ NAV_t - NAV_{t-1} - contributions + redemptions + distributions \over NAV_{t-1} + TwdC - TwdR - TwdD $$

The capital growth is computed as follows:

$$ NAV_t - NAV_{t-1} - contributions + redemptions \over NAV_{t-1} + TwdC - TwdR - TwdD $$

The distributed income return is computed as follows:

$$ ∑distributions \over NAV_{t-1} + TwdC - TwdR - TwdD $$

For more information about Performance Measurement visit the INREV Guidelines on Performance Measurement.

16.    Are the indices calculation reviewed by any external organisation?
INREV ODCE Index is a sub-index of INREV Index and, as a result, an external party performs a review of the index calculation. This is only ensuring the mathematical correctness of indices; data validation is carried at data submission stage.

17.    When was the Index launched and when does the data date back to?
The consultation index was launched at the end of April 2019 and is now published 8 weeks after quarter end. . The history of the Quarterly ODCE Index dates back to Q3 2011. 

18.    How ODCE index compares to other non-INREV indices? 
While there is quite substantial overlap between the contributing fundsthe differences are on many levels: 

  • Participants. Not all funds contributing to ODCE are present in other European open end core funds indices and vice versa, despite a significant overlap. Please consult the contributors list of the respective indices. 
  • Methodology. INREV is applying the Modified Dietz method and provides NAV weighted performance adjusted by day weighted cashflows. The performance is not unitised based performance.
  • Compliance with criteria. An eligible fund is only included in the ODCE Index after it has satisfied diversification and leverage thresholds for four consecutive quarters. 

19.    Why are MSCI’s PEPFI dividend yield and INREV ODCE income returns so different?  
At this stage, INREV publish a very limited number of performance metrics and dividend yield is not one of those. INREV will be looking to add more metrics at future stages of the index, alongside more transparency into individual funds’ information. 

New possible performance metrics under consideration are (not limited to):performance quartiles, distribution yield, accruals based income returns and management fees.

20.    Are all funds reporting performance on the same basis?
Funds are reporting performance data using managers preferred NAV calculation method. INREV is encouraging managers to use INREV NAV calculation method but that currently is not a requirement. 

INREV will be looking into the possibility of aligning the NAV calculation requirements to ensure a greater comparability in a future. At this stage, funds applying INREV

NAV or adjusted INREV NAV calculation are representing over 75% of index NAV. Just under a quarter of index NAV is represented by IFRS or adjusted IFRS calculation methods.

21.    How comparable is INREV ODCE  to NCREIF’s and ANREV’s ODCEs?
INREV’s applied total returns formula is aligned with that of ANREV and NCREIF. 

In addition to performance metrics currently disclosed in INREV ODCE, both ANREV and NCREIF also disclose the Accruals based income returns. Consistent range of reported metrics is a next step for all organisations to be able to launch the Global ODCE index. 

Questions about ODCE Index?

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