Guide to completing the INREV DDQ

The user should provide a concise summary of the investment and leverage strategies, using clear and descriptive language. Answers should avoid directly replicating PPM content and limit the use of visuals unless necessary - if included, their relevance should be explained (should be a concise depiction of the investment criteria, guidelines and leverage strategies).  

The user should keep the answer short (up to 500 words). The user should use descriptive language for a clear and concise answer; limiting the use of tables, graphs, or lists from external sources. If such visuals are included, their relevance should be explained within the text. An example response has been provided below. 

Text example -​ Investment strategy, objective and ​key themes of the vehicle​

Fund XYZ aims to provide diversification across asset classes, countries, cities, and sectors by strategically investing in core assets. Employing an income growth-oriented investment strategy, the Fund focuses on well-established and transparent markets within Europe.​

Our investment scope zeroes in on major cities and conurbations displaying robust economic and population growth, fuelling sustained occupier demand and rental growth. Mainstream asset classes such as offices, retail, logistics, along with residential and hotels, are targeted. The Fund adopts a flexible asset allocation approach to capitalise on attractive opportunities throughout the real estate cycle.​

With a targeted long-term gross return of 7% - 8%, the Fund aspires to deliver a net return of 6 - 7% per annum post-management fees, varying based on the share class. Additionally, an income distribution goal of 3.5% - 4% per annum is set, emphasizing the Fund's commitment to achieving stable long-term income through core real estate assets across Europe.​

Fund XYZ's investment style combines elements of growth and value creation, with an added focus on sustainability across the portfolio. The core strategy involves investing in high-quality assets situated in established locations within major European cities. The Fund boasts a diversified portfolio across sectors and geographies, focusing on assets in well-established locations featuring top quality building specifications and tenants with robust covenants. Proactive asset management initiatives, including re-leasing, repositioning, and refurbishment, play a pivotal role in optimising portfolio assets. The Fund may allocate up to 20% to assets categorised as "non-income producing," defined by occupancy levels below 80%.​

Aligning with responsible investing, Fund XYZ integrates ESG principles to shape its strategy. The Fund prioritizes resource efficiency, community engagement, tenant well being, and governance standards across its diverse portfolio. Committed to ethical practices, Fund XYZ believes ESG integration enhances financial performance, mitigates risks, and identifies valuable opportunities, creating lasting value for investors and communities alike.

The user should keep the answer short (up to 500 words). The user should use descriptive language for a clear and concise answer; limiting the use of tables, graphs, or lists from external sources. If such visuals are included, their relevance should be explained within the text. An example response has been provided below. 

Text example - ​Vehicle leverage strategy ​

Fund XYZ strategically employs leverage with a targeted 25% loan-to-gross asset value (LTV) at the portfolio level and an absolute limit set at 40% LTV. Short-term borrowing, capped at 30% of NAV for maturities under 12 months, is in place. Exceeding a 33% LTV at the portfolio level necessitates Investor Advisory Committee (IAC) consultation. Individually, assets may leverage up to 65% LTV at acquisition.​

Maintaining robust controls, the Fund adheres to interest coverage, debt-service coverage, and LTV ratios. For instance, the interest coverage ratio is maintained at a minimum of 2.5, ensuring prudent financial management. The debt-service coverage ratio is targeted at 1.5, providing a healthy buffer for debt obligations. The Fund engages in unsecured financing from the bond market, with an average interest rate target of 3.5% to finance growth and refinance existing debt. To manage interest rate risk, a minimum of 80% hedging is consistently maintained. Collateralised debt is used judiciously,  with a diverse range of debt facilities to optimize funding flexibility. Currently, the Fund operates with five debt facilities, each structured to accommodate specific investment needs. This approach ensures a comprehensive yet controlled leveraging strategy for optimal performance and risk mitigation.​

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(or)​

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In alignment with green financing principles, Fund XYZ strategically employs environmentally conscious leverage. The Fund targets a 25% loan-to-gross asset value (LTV) at the portfolio level, with an absolute limit set at 40% LTV. Short-term borrowing, capped at 30% of NAV for maturities under 12 months, adheres to green financing standards. Exceeding a 33% LTV at the portfolio level requires Investor Advisory Committee (IAC) consultation. Individually, assets may leverage up to 65% LTV at acquisition, with a focus on green initiatives.​

Maintaining robust controls, the Fund adheres to green-focused interest coverage, debt-service coverage, and LTV ratios. For instance, the interest ​coverage ratio is maintained at a minimum of 2.5, ensuring prudent financial management with an environmentally conscious approach. The debt-service coverage ratio is targeted at 1.5, providing a healthy buffer for debt obligations while adhering to green financing principles. The Fund engages in unsecured green financing from the bond market, ​with an average interest rate target of 3.5% to finance green initiatives and refinance existing debt. To manage interest rate risk, a minimum of 80% hedging is consistently maintained, aligning with green financing goals.​

Collateralised green debt is used judiciously, with a diverse range of green debt facilities to optimise funding flexibility. Currently, the Fund operates with five green debt facilities, each structured to accommodate specific environmentally friendly investment needs. This approach ensures a comprehensive yet environmentally conscious leveraging strategy for optimal performance and risk mitigation in the realm of green financing.​

​The user should clearly describe the organisation’s ESG strategy and its integration into the vehicle strategy. The response should outline the time frame of the strategy in relation to the vehicle’s life cycle and style. The response should include any regulatory framework to which the strategy will be aligned. The user should also explain how ESG policies, including environmental and social aspects, such as DEI initiatives, are embedded at both vehicle and organisational levels. If not applicable, the user should state this and provide an explanation. Responses should be concise, avoiding repetition of PPM content or other regulatory, and use descriptive language. The user may include relevant policy documents as appendix. 

The user should specify the ESG strategy of the vehicle (and how this is integrated into the overall business strategy), keep the answer short (up to 500 words). The user should use descriptive language for a clear and concise answer; limiting the use of tables, graphs, or lists from external sources. If such visuals are included, their relevance should be explained within the text. An example response has been provided below.  

The user should also highlight DEI initiatives as a part of the social aspects. If not applicable, please add N/A and explain. 

The user should clearly describe the fees and expenses paid by the vehicle. The response should also outline the types of fees that may potentially apply. The user should specify whether fees are calculated on a NAV or GAV basis. 

The user may also include details of the TGER split per share class.  

The user should mention clearly if there are any deviations from the INREV NAV Guidelines, which state that set-up costs and acquisition expenses are capitalised and amortised over five years. 

The user should outline decision-making structures, investor committee roles, and risk oversight procedures, where helpful, supported by visuals or process descriptions. Pricing policy answers may include assumptions, governance, frequency, and any use of INREV NAV. Direct replication from legal documents should be avoided. 

The user should keep the answer short (up to 500 words). The answer may include a flow chart/visual aid, if needed, to explain the process clearly. 

The user should clearly mention the eligibility criteria for the Investment Advisory Committee (IAC), the role they play and mention the matters for which they may be consulted. Other details may include the max/ min number of investors/ representatives on committee, the frequency of meetings, voting procedures, quorum requirements and membership rotation policy (if applicable). 

The user should keep the answer short (up to 500 words). The answer may include a flow chart/ visual aid, if needed, to explain the chronological description of the process clearly. Other details may include the role of any risk management team/committee, main risk parameters considered, frequency of risk review and reporting, and the process for fixing, breaches of risk limits/tolerance. An example response has been provided below. 

Text example - Risk ​management process and ​monitoring of the vehicle ​

Risk management is thoroughly integrated into ABC IM processes, with each organizational function ​having specific roles and responsibilities. This ensures continuous risk oversight throughout Fund XYZ's lifecycle.​

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1st Level Permanent Control –​

Individual Team Member​

​Every team member in fund management, asset management, and transaction teams is primarily responsible for performance and risk controls, regardless of their role.​

- Pre-investment: The transaction team serves as the initial control layer, assessing acquisitions before logging them into our deal flow database (the “asset flow tool”). The fund manager subsequently reviews the asset to ensure alignment with the fund’s guidelines. Once selected by fund management, all acquisitions are reviewed by the Investment Committee for senior management and risk management scrutiny. The Investment Committee’s function is to rigorously examine all proposed investments. Their main objective is to facilitate an open discussion about a proposal before recommending a price for final approval by the investment management company.​

- Post-investment: Per ABC IM -​

investment governance, the Fund Manager is the first to identify any deviations from the Fund’s guidelines. The Middle Office acts as a secondary control, performing additional checks alongside the ongoing reviews by the fund management team. Compliance functions also conduct checks as needed to ensure adherence to guidelines and restrictions. The asset management team manages daily asset operations and reports any deviations from the business plan to the fund management team.​

2nd Level Regular Control – ABC IM ​

Risk Management Teams​

The dedicated Risk Management and Compliance teams at ABC IM provide a second level of control, ​independently overseeing investment, operational, and regulatory risks. The Investment Risk Management team is part of the Investment Committee involved in reviewing investments. After an investment is made, a risk profile is established for each fund and monitored by the risk management team.​

At a strategic level, biannual fund reviews are conducted where Fund Management, along with legal, risk, and compliance teams, presents the Fund’s performance to the Management Board. The Fund Review process enables senior management, including risk management, to monitor investment and asset management strategies, performance, budget variances, and future fund priorities and guidelines. This senior management team may offer advice to the Fund Manager to adjust the Fund and its strategy according to evolving market conditions and requirements.​

The risk management team broadly sets standards and limits, proactively identifies risks, implements remediation plans, and monitors both investment and operational risks.​

3rd Level Periodical Control – ABC ​

IM Internal Audit Team​

The Internal Audit team at ABC IM provides the third level of control. Internal Audit delivers an independent ​and objective assessment of the control environment's effectiveness, supporting ABC IM’s global business, including the activities of ABC IM. Reviews are conducted across functions and locations using a standardized methodology for planning, execution, and reporting. ​

Audit findings are documented in a report first communicated to the CEO and the Global CFO, COO & Company Secretary of ABC IM, and then to the Audit Committee of the Board of Directors of ABC IM.

The user should limit direct replication from external sources such as the PPM or other legal documents. Other details may include frequency of pricing, use of internal and external valuation processes and the use of INREV NAV (and any deviation from INREV NAV Guidelines). 

The user should provide details around the exceptional circumstances described in the answer and reference any relevant past events where discretion was employed. 

This section intends to provide a complete overview of the manager’s structure, including any affiliations with other businesses. The response should also give an overview of the real estate business and strategies, highlighting how these have evolved over the past three years. 

The user should include sufficient information around the investment stage of these vehicles/ separate accounts, any possible conflicts of interest and how these are being addressed. The user may also use a table to answer this question. 

The user should describe whether the current vehicle strategy aligns with strategies of previous vehicles managed by the investment manager, highlighting any material changes. The user should also explain the types of research used to inform strategy, including whether it is conducted in-house or by third parties, and the tools and team involved. The user should outline the breakdown of the target returns for the vehicle. If a data room is not applicable, the user should state this. For open-end vehicles, the user should disclose any past breaches of debt restrictions or covenants and explain how they were managed. 

The user should mention if the current strategy has changed and highlight the differences in strategies of the current vehicle as compared to previous vehicles managed by the manager (eg expansion of geographical territories, leverage approach, portfolio management approach etc.) 

The user should keep the answer concise, including information on the use of in-house and/or third-party research (including proprietary and paid-for/bespoke research), and the tools used (i.e., excel, programs, in-house systems). Other details on the number of dedicated research team members, their locations and how insights from the three types of research are combined, and whether the research team participates in the investment making decisions should also be clearly mentioned. 

The user should provide information on the breaches over the last 3 years, if any, and how these have been mitigated. Indicate if any prospectus or PPM changes to the LTV limit have been made since the initial limit (mention temporary changes as well). 

The user should provide information on the breaches over the last 3 years, if any, and how these have been mitigated. 

The user should clearly explain how the ESG strategy is linked to the organisation objectives over the full lifecycle of the strategy implementation. This should outline at the organisation or vehicle level the objectives and policies and how these are integrated into the governance framework, including how those involved in the ESG strategy are assessed (whether they are linked to staff remuneration and supported by measurable KPIs). Responses should cover ESG targets, performance, risks and opportunities and be concise yet comprehensive. The user should focus on the asset lifecycle and the implementation of the ESG Strategy over this time and the associated reporting. For certified assets, the user should provide a summary aligned with the vehicle fact sheet. Where applicable, the user may refer to the INREV ESG SDDS template. All answers should be specific, and if certain elements are not applicable, this should be explained. 

In case there are specific ESG objectives which feed into the investment manager’s remuneration, the user should explain this explicitly. 

In the case of a portfolio, the user may refer to the INREV ESG SDDS template. 

The user should include and explain the primary reasons for asset write-downs or losses (eg market correction, macro-economic factors, change in leasing situation, inability to carry out original business plan etc.). Other factors from attribution analysis should also be highlighted. 

The user should provide an overview of the most relevant terms of the legal documents or PPM. The user should not copy directly from the legal documents. 

If any of the below items are not applicable, the user should explain in the comments column. 

In addition to this section in the Preliminary Stage, the user should provide further details on the performance fees 

The user should include details of whether this is performed internally by the investment manager and/or with support of any third-party review/ consultation and the timing/ frequency of these activities. 

The user should include a base case, under and over performance scenarios and provide a summary or rationale for changes in inputs. 

The user should explain any updates to the investment process, including committee structures, research, ESG integration, and use of technology. Input from internal or external teams should be described, as well as committee composition and terms. The user should outline asset sourcing methods, allocation across vehicles, and due diligence responsibilities, including, but not limited to, co-investment policies, joint venture structures, and outsourcing arrangements, risk controls, pricing, and foreign exchange policies, along with models or metrics used in the analysis. If applicable, the user should refer to relevant policy documents or include supporting visuals for clarity. 

The user should describe changes such as structural changes to the investment committee, documentation, portfolio and risk management approach, level of consideration of factors such as ESG, operational aspects, use of new technology and addition of relevant new skill sets to their team. 

The user should include details of the type of input provided by other internal teams and/or any support from third-party contributors, common reporting lines and any relevant compensation/incentivisation factors. 

The user should keep the answer concise, describing where the investment committee is geographically based.  

Please note that this version of the DDQ is from 2023. The user should include references to AI in the appropriate questions, if applicable. 

The user should clearly mention if they have teams located in each market where deals are sourced under the strategy and provide the percentage of off-market transactions historically. 

The user should provide the number of investments in the past 2 years where a decision has been taken to allocate to other vehicles with similar strategies (and which would otherwise have been allocated to this vehicle). Refer to Appendix VII for the products managed by the investment manager. 

The user should include other models, metrics and guidelines which are not mentioned in the list above, if relevant. The user may also consider replacement cost and how this is evaluated. 

The user may use flow charts or diagrams to describe the Due Diligence team and refer to the overall investment team flow chart (question 1.6.1) 

The user should mention if any co-investments have been done in the past and the standard coinvestment fees. Provide a summary of the number of co-investments deals offered to investors over the last 1,3 and 5 years, the number of investors that participated, the quantum offered and raised. 

The user should include details of situations where they would expect to arrange joint ventures as opposed to completing an investment in-house. ​

Details of how JV partners are aligned with the user and the vehicle’s interests should also be included. 

The user should include details of how agreements with third-party service providers or JV partners structured, tendering processes are, how performance is monitored, reporting lines and periodical reviews of contracts/service. ​

The user should also describe how alignment is achieved between external asset managers and property managers and may highlight any competitive advantage they have over their peers. 

The user should include details such as the basis for the policy, the use of third-party service providers to advise and/or arrange and manage hedging instruments. 

If applicable, the user should share the relevant policy document in the Data Room. 

For this section, ​

Senior staff includes dedicated personnel who are considered influential at the organisational level or with respect to the vehicle. ​

Key members include dedicated personnel who are significantly important to the functioning of the vehicle and/or have decision making power. 

The user may also include a new column in the table explaining the reasons for the departure of mentioned senior staff. 

The user should include expected timeframes where known, and whether such succession is expected during the life of the vehicle. 

The user should include details of any market compensation studies or consultation which is undertaken as part of the compensation review process, and how these may influence compensation decisions. 

The user should provide anonymous breakdown of the nature of the investor base (if the fund has closed) and outline the nature of the relationship of the investor (related party) to the vehicle.  

The user should provide concise responses covering recruitment processes, use of third-party recruiters, and internal vs external hiring decisions. For staff development, the user should outline how training needs are identified and monitored, including CPD certification. Business strategy responses should include high-level plans over the next three to five years, such as vehicle launches, AUM growth targets, and organisational expansion. 

The user should keep the answer concise including details of the use of third-party recruiters, typical interview/assessment process, company level policies and any specific provisions for recruitment of senior employees. The user should also include the reasoning behind the appointment of external recruitment vs internal promotions or sideways moves. 

The user should include details of how training and Continuing Professional Development certification is monitored and any processes to identify the need for and to provide further training to the staff. 

The user should keep the answer concise including high-level details of plans such as expected successor vehicles and/or new vehicles/ strategies, targets for growth in AUM, company growth and planned new office locations. ​

The user should seek to include the governance framework that exists within the organisation and its appropriateness under the relevant regulation (i.e. composition and terms of reference of the valuation committee, role of the AIFM etc). The user should also consider the processes, controls and governance of the data underpinning the valuations. The name of the valuer and any reconciliation between different valuation methodologies should also be included.  ​

For a closed ended fund the user should outline the equalisation methodology and capital charge mechanism. ​

The user should also mention any events in the past that led to a change in the valuation for an underlying asset.  ​

The user should use the INREV Self Assessment Tool to check the compliance score of the vehicle with the INREV Guidelines. The calculation methodology can also be found via the link. For INREV NAV, the user should mention if this is subject to external audit or review.   

If Data room is not applicable, the user should add N/A and explain. These reports may also be added to the DDQ as an attachment in this case. ​

If not, the user should provide an explanation and outline the applicable MFN rules of the vehicle, if appropriate. ​

The user should include the details of any third party service providers or systems which are or have been used in the risk assessment process. ​

The user should include details of reporting lines and responsible functions (eg AML Reporting Officer). ​

Please note that this version of the DDQ is from 2023. The user should include references to AI in the appropriate questions, if applicable. ​

The user should include details of any third-party regulatory service providers if relevant, eg, providing appointed representative or tied agent services. ​

The user should consider the relevant boards to the fund and manager. These should consider at least the Investment Committee, Valuation Committee, Risk Committee, AIFM, LPAC and any other Advisory Board required under the jurisdictional regulation, and/or other relevant committees.  ​

The user should include personal investments from the team or key personnel in the respective vehicle as well as the parent company. Details of the amounts and how such commitments are funded (e.g. from own funds, company or third-party loans, salary/bonus contributions etc.) and use of co-investment vehicles and phantom/synthetic schemes should also be included, subject to any confidentiality agreements. ​

If a Data room is not available, the user should add N/A and explain. The relevant  reports may also be added to the DDQ as an attachment in this case.​