Due Diligence always
IQ spoke to Jaap van der Bijl, CEO at Altera Vastgoed and Amilcar Grot, Senior Portfolio Manager at Achmea Investment Management, former Chairs of the INREV Due Diligence Committee.
Effective due diligence is crucial in all market conditions, and the INREV Due Diligence Questionnaire (DDQ) has played an important role in the industry since its creation in 2007. Developed to benefit both managers and investors, it has the aim of saving time and improving efficiency – with investors gaining vital information to make informed decisions and managers able to prepare just one version of the questionnaire for many interested investors.
From fund manager structure to non-listed real estate transactions, the DDQ provides investors with explanations of specific vehicle strategies, risk processes, and anticipated returns. So, investors can assess whether an offer matches their objectives and create a shortlist of offers in the marketplace.
Amilcar Grot, discussed this shortlisting process: ‘The DDQ is a useful tool that offers a phased approach for tailoring the type of questions to the relevant stage of due diligence, but then investors have to do their homework to make sure their partner is aligned with their objectives.’ And strong relationships are even more important during uncertain financial climates, with more detailed information becoming a key priority.
Jaap van der Bijl, commented: ‘In the current environment, investors will want to know about risk management and affordability, how managers factor in ESG and DEI, even cybersecurity given the recent events between Russia and Ukraine. Managers should be ahead of these questions and be able to show how they’ve prepared for the future.’
Yno van Haaster, Director, Multi Management Solutions Alternatives at Columbia Threadneedle and current Chair of the Due Diligence Committee, added: “The INREV DDQ, with supporting materials, forms a framework that allows investors to do a consistent analysis on investment opportunities within a limited time. To encourage the standardisation of due diligence in non-listed real estate vehicles, the Due Diligence Committee continually reviews the DDQ and has recently released Guidance Notes for the enhanced and consistent completion of the DDQ.”
The DDQ is regularly reviewed to make sure it includes the most important information that investors require. The last update in January 2023 integrated ESG issues across all stages of due diligence and includes new questions on Anti-Money Laundering (AML), as well as IT, Cyber, and Physical Security processes. To help members provide consistent and comprehensive responses, detailed Guidance Notes are now available. These notes focus on open-ended questions, advising on word count, areas to cover, avoiding repetition, and practical examples. This support is designed to streamline the due diligence process and ensure clarity and thoroughness in responses, ultimately facilitating better communication with investors.
It is important to note that the DDQ is not intended to replace investor and manager engagement.
At all times, managers should engage with their investors and be able to show how the product is operating under the current market conditions, and how they are prepared to deviate where necessary.
Amilcar continued: ‘In a downmarket, it’s important that market participants have transparency and open discussion. These are long-term relationships, and they need to be able to navigate difficult environments together.’
Explore the INREV DDQ or reach out to professional.standards@inrev.org for any questions.