Funds of funds rose to record high €52.6 billion AUM in 2021, delivering a positive net return for nine consecutive years
13 July 2022, Amsterdam – According to the ANREV / INREV Funds of Funds Study 2022, published today, funds of funds achieved the highest returns since the study began in 2007, following a year of strong performance.
Similarly, the ANREV / INREV / NCREIF Fund Manager Survey 2022 demonstrates a year of increased investor appetite for the segment, with assets under management (AUM) by funds of funds surging to a record high of €52.6 billion. Both studies showcase the benefits of scale and diversification that funds of funds offer.
The performance of funds of funds improved significantly last year, with returns growing to the highest level since the study began 15 years ago. As a group, funds of funds achieved a total return of 12.4% in 2021, compared to 1.7% in 2020, driven by the industry’s post-pandemic recovery.
A similar picture also emerges when assessing the distribution in performance of individual funds of funds. 2021 saw an increased spread upwards as several funds of funds reported exceptionally strong performance, when even the 10th percentile was the highest in the study’s history and in the positive territory.
Continued growth of global strategies
When looking at targeted regions, funds of funds with a global strategy account for the
largest share of the ANREV / INREV Funds of Funds Vehicle Universe, representing 77% of the total by number, and 95% of the total NAV. This is followed by funds of funds with a European investment strategy, representing 23% of the Universe, however only accounting for 5% of the total NAV.
Funds of funds with global strategies also delivered their twelfth consecutive year of positive returns. The total return increased to 12.6% compared to 1.5% in 2020, while funds of funds targeting Europe delivered 7.5%, compared to 3.9% in 2020.
Core style funds of funds dominate
Funds of funds with a core investment style account for over half (59%) of the Universe by number, and 96% of total NAV. The remainder of the ANREV / INREV Funds of Funds Vehicle Universe is split between six value added and three opportunity funds of funds, accounting for 4% of total NAV.
On average, funds of funds following a core strategy are the largest in size with a total NAV of €1.7 billion. However, the three largest core style funds of funds average €6.0 billion of NAV, collectively representing 79% of the Universe’s total NAV.
In comparison, value added style funds of funds account for only 3% of the total NAV, with an average of €127 million per vehicle. Funds of funds with an opportunistic investment style are the minority, accounting for the remaining 1%, with an average NAV of €92 million per vehicle.
When looking at performance, there is a strong correlation over time, with core strategies outperforming non-core strategies in most instances. However, in 2021 non-core funds of funds outperformed core funds of funds, with total returns of 14.4% and 12.3%, respectively. Regardless, both core and non-core funds of funds saw a substantial improvement in performance last year. For core funds the total return increased from 2.0% in 2020, while non-core funds saw a substantial uptick from -3.1% in 2020.
There were further positive notes of sentiment according to the ANREV / INREV / PREA Investment Intentions Survey 2022. The share of investors targeting Europe and expecting to raise their current allocation to funds of funds over the next two years increased to 7.0%, compared to just 1.7% in 2021, while the percentage of those expecting to decrease their allocations declined from 6.7% in last year’s survey to 5.6% this year.
Iryna Pylypchuk, INREV’s Director of Research and Market Information, said: ‘Over the last year, the consolidation of the industry has continued, with significant growth of a few large, core style funds of funds. This growth has been spurred on by investors seeking benefits of scale and diversification, and we see that reflected in the growing number of funds of funds with a global strategy. While the 2021 performance impressed on the upside, given the rapid shift in the economic and macro-outlooks, the focus for 2022 is likely to be pivoted around diversification and balancing out potential market volatility. In this respect, the diversified nature of the segment may well support a further increase in allocations to funds of funds, but to what extent that will be executed in the very short term remains to be seen.’
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Notes to Editors
About the Funds of Funds Study 2022
The Fund of Funds Study provides insights on performance, target region, style, structure and other characteristics. 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 funds of funds Universe of 22 vehicles with a total NAV of €23.1 billion. However, performance figures are based on a reduced sample of 16 funds of funds with a total NAV of €23.3 billion, this sample surpasses the total NAV of the Vehicle universe as not all funds of funds disclosed their (updated) NAV’s.
Sample size for the study varies year-on-year so historical comparisons should be treated with caution.
INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for institutional investors and other participants in the growing non-listed real estate vehicles sector. The association represents and reflects an industry with a total value of €2.8 trillion and INREV members deliver €385 billion of stimulus to the real economy of Europe.
INREV has 491 members which include 120 of the largest institutional investors as well as 40 of the 50 largest real estate fund managers, plus banks and advisors across Europe and elsewhere.
The non-profit association is focused on increasing the transparency and accessibility of non-listed vehicles, promoting professionalism and best practice, and sharing knowledge. It is based in Amsterdam, the Netherlands.
 Aggregated average total returns are calculated on a weighted by NAV basis, net and stated in local currency.