Opportunistic funds, club deals to be recognised in INREV data

The European Association for Investors in Non-listed Real Estate Vehicles (INREV) is working to introduce opportunistic funds in its annual Index to complement the core and value-added investment spectrum. Club deals and joint ventures are also being reviewed for inclusion in the association’s key indices.

Speaking at the INREV’s recent annual conference in Barcelona, research director Casper Hesp said a consultation list of opportunistic funds is planned for the fourth quarter of 2013.

At present, the organisation's index includes core funds representing some €130bn of assets and €37bn worth of value-added vehicles. These funds showed returns of +0.3% and -4.7% respectively in 2012. In total, the index represents 294 funds with the UK and Germany each representing a 25% share.

Hesp said the group is also working towards the launch of a global index in cooperation with its US and Asian counterparts, NCREIF and Anrev. ‘We are launching this based on a sample of core funds, which are the best covered in Europe,’ Hesp said. This will help them to properly compare non-listed real estate fund performance with other competing asset classes on a global level, he added.

Europe represents roughly 33% of the global index by volume, with the US dominating the picture at 55%. The global index will include a total of 643 funds representing a gross asset value of €500 bn, with the potential to reach €750 bn in the future.

Hesp said the first index results show that core Asia is outperforming both the US and Europe on a seven-year horizon, reporting a return of 7.3%, versus 0.6% for Europe and 2.7% for the US.

Commenting on the decision to launch a global index, Hesp pointed out that today more than ever investors are active on a global basis and that non-listed funds are a global asset class. ‘Many fund managers are part of global platforms and are interested in analysing risks and returns of the funds across the globe on a like for like basis,’ he noted.

The conference also addressed the emergence of club deals and joint ventures as an alternative investment model to the traditional fund structure, with Pramerica’s Eric Adler outspoken on the need for these to be recognised in INREV’s reporting. “We (as the investor community) believe in alignment of interest and we want more control. This means that club deals are increasingly being used and that funds are interacting more and more with investors. The line between club deals and funds is disappearing”, he said.

INREV’s Hesp said the new structures have already been included in the database of the general INREV spectrum and the organisation is working towards including club deals in its annual index “as soon as possible”.