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Non-listed real estate management fees remain stable

Costs vary according to vehicle characteristics 


07 October 2020, Amsterdam – The latest INREV Management Fees & Terms Study 2020 reflects a broadly consistent level of fees and costs faced by investors in European non-listed real estate vehicles, compared with the previous study published two years ago.

Average Total Expense Ratio (TER) for all vehicles based on gross asset value (GAV) before performance fees was 0.87% (as reported for 2019), versus 0.86% reported for 2017.However, a cross-sectional review of the results reveals a more nuanced picture, highlighting notable variations based on vehicle characteristics, such as size, style and structure. 

The latest findings reveal that larger European non-listed real estate vehicles exhibit lower expense ratios. Larger vehicles (over €1 billion GAV) recorded a notably lower average TER based on GAV and before performance fees at 0.62%, compared with a 1.18% equivalent for smaller vehicles (less than €500 million GAV).  
Similarly, core funds posted a 0.80% average TER, versus value added and opportunity funds, each with 1.05%. The differences between open end and closed end funds were similar to those observed between core and value added funds. Open end vehicles reported an average TER of 0.68%, while those with a closed end structure hit 1.20%. Funds with over 60% target gearing noted an average TER of 1.82% – almost three times the 0.66% shown by funds with less than 40% target gearing.

Differences also occurred across vintages. Funds launched between 2001 and 2007 and those launched from 2007 onwards filed an average TER of 0.91% and 0.92% respectively; whereas, older funds lunched before 2001, showed a lower average TER of 0.56%.  The evolution of the funds can  partly explain these results as the sample of funds launched before 2001 now only includes open end funds, which tend to display lower TERs, as the older funds with a finite structure (closed end funds) have now liquidated and are no longer part of the study.

Funds that follow a single sector strategy show lower average TERs compared to funds that follow a multi sector strategy. There were interesting divergences across vehicles targeting single sectors.  Those focused on offices posted the lowest average TER of 0.53%, while vehicles focused on residential, retail and industrial / logistics reported TERs of 0.61%, 0.80% and 0.93%, respectively.  

Iryna Pylypchuk, INREV’s Director of Research and Market Information, said: ‘ These results reinforce the fact that size really does matter; as do all other characteristics, be it style, structure, geography and sector strategies, vintage and gearing. The numbers suggest that riskier strategies are likely to encounter higher fees as a proportion of a vehicle’s GAV, while large core funds report lower expense ratios. That said, the complexity of diversification clearly comes at a more elevated cost, so multi-country and multi-sector strategy funds apply higher TERs than those targeting a single country or sector.’

– Ends –

For further information, please contact: 
Johlyn da Prato, johlyn.daprato@inrev.org  | +31 (0) 621397456
Justin St Clair-Charles, inrevteam@firstlightpr.com | +44 (0) 7769 644 059
Josie Workman, inrevteam@firstlightpr.com | +44 (0) 7460 325 392
Notes to Editors

About INREV Management Fees & Terms Study 2020

The INREV Management Fees & Terms Study 2020 records the fees and cost structures of European non-listed real estate vehicles with a focus on Total Expense Ratios and Real Estate Expense Ratios.  Launched in 2007, the study is published every two years.
The latest edition includes 90 vehicles (57 open end and 33 closed end), which collectively represent a total gross asset value of €112.6 billion as at end of 2019.
In 2020, INREV, ANREV, NCREIF and PREA introduced the Total Global Expenses Ratio as a new global standard intended to harmonise the approach for measuring fees and costs for real estate investment vehicles.

About INREV
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 461 members which include 86 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.