3 December 2019, Amsterdam – New research reveals a divergence of non-listed real estate total expense ratios (TER) between Asia Pacific and Europe.
According to the INREV / ANREV Management Fees and Terms Comparison Study 2019, the average TER for non-listed real estate funds in Asia Pacific is 1.04% on a gross asset value basis (GAV) before performance fees, compared to 0.86% in Europe. The disparity also exists when TER is calculated on a net asset value (NAV) basis.
The study identifies size as an important determining factor for TER. While larger vehicles (over €1 billion in value) have similar TERs on a GAV basis in both regions; medium sized funds (€500 million to €1 billion) reached 0.71% in Europe and 0.90% in Asia Pacific; small funds (less than €500 million) had the highest average TER by comparison and the biggest disparity between the two regions, at 1.07% in Europe and 1.67% in Asia Pacific.
Vehicle vintage is also significant. Younger vehicles tend to have higher TERs than older vintages. Funds launched in Europe and Asia Pacific before 2007 have an average TER of 0.77% and 0.54% based on GAV, versus those launched in the last five years which recorded average TERs of 1.34% and 1.64%, respectively.
With respect to single sector performance, all traditional sector funds in Asia Pacific have smaller TERs than in Europe on both a GAV and NAV basis, before and after performance fees. For example, TERs based on GAV for industrial and logistics are 0.53% in Asia Pacific versus 0.84% in Europe – ahead of retail funds in both regions.
Despite differences elsewhere, funds split by structure are fairly similar across both Asia Pacific and Europe – with the average TER for open end funds on a GAV basis at 0.70% and 0.66% in Asia Pacific and Europe respectively. But there are more noticeable differences when looking at TERs for closed end funds. TERs before performance fees are higher for Asia Pacific, at 1.30% on a GAV basis compared with 1.18% for Europe.
Lonneke Löwik, INREV CEO, commented: ‘These results are more pertinent than ever, given the increasing need for clarity on fees and costs. This detailed breakdown of TERs across Europe and Asia Pacific provides useful insight into the differences and similarities across regions and markets that will help inform investment decisions. It also reflects the efforts of INREV and the industry as a whole to exert downward pressure on fees; and adds to the consistent drive for greater transparency.’
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Notes to Editors
About the ANREV / INREV Management Fees and Terms Comparison Study
The ANREV / INREV Management Fees and Terms Comparison Study compares the fee and costs structures of European non-listed real estate investment funds in Asia Pacific and Europe, with a focus on total expense ratios (TERs) and real estate expense ratios (REERs).
A total of 204 vehicles provided data for the 2019 study, of which,155 are non-listed real estate funds domiciled in Europe and 49 in Asia Pacific.
The report is based on the regional studies conducted by ANREV and INREV during 2018. This is the sixth time a comparison study has been conducted.
INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for 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 470 members which include 85 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.
ANREV is the Asian Association for Investors in Non-Listed Real Estate Vehicles, a not-for-profit organisation based in Hong Kong. ANREV's agenda is driven by the members, in particular the investors, and is focused on improving transparency and accessibility of market information, promoting professionalism and best practices, sharing and spreading knowledge. Fund managers, investment banks, lawyers and other advisors provide support in addressing key issues facing the Asian non-listed private equity real estate fund markets.
ANREV is a sister organisation to INREV in Europe and works with a number of other associations across Asia Pacific and North America on research and professional standards. www.anrev.org