A review by INREV confirms strong uptake of the INREV Guidelines on reporting in 2010. A commanding 97% of non-listed real estate funds use more than 50% of the Guidelines.
The headline figures reflect the industry's high level of transparency, which continues to increase. However, this year's review reveals a marginal decrease of one percentage point on the previous year, probably due to sampling, indicating stabilization in adoption levels.
This leveling off reflects the fact that the industry has reached a certain level of maturity in its reporting practices, with the INREV Guidelines being used as the de-facto industry standard.
There was a notable increase in the overall adoption level of the Guidelines among smaller funds of under 100 million, increasing from 54% in 2009 to 71% in 2010.
Other significant gains were made in specific areas such as property reporting where the INREV Guidelines are now being adopted by 90% of funds, up from 79% in 2009. Likewise, in the area of financial reporting there was an increase to 75% of all funds complying with most of the INREV Guidelines.
"The message is clear: following three consecutive years of rapid growth, adoption levels are reaching their optimum point. We're very pleased that the vast majority of funds have adopted many of the guidelines so conclusively. However, the Review has also highlighted areas where there is still room for improvement," said Jeff Rupp, Director of Public Affairs and Professional Standards, INREV.
Work in progress
The area that continues to pose the biggest challenge is fee metrics where there has been no improvement in adoption levels since 2009. The INREV Fees Committee will be leading initiatives to improve both the metrics and adoption levels of this element of the Guidelines.
Adjusting to INREV NAV
According to the Review, the INREV NAV continues to gain ground showing that the industry is becoming more comfortable with the idea of an adjusted NAV.
The 2010 Review notes that 46% of the reports reviewed disclosed an adjusted NAV compared to 42% in 2009. Of the 46% with an adjusted NAV, 80% either fully complied with the INREV NAV calculation or referenced the INREV measure as the basis for their calculations.
There is still further work to be done on increasing the number of funds using adjusted NAVs in their reports. INREV believes that its work in this area will provide investors with better quality of information with which to compare the performance of different types of funds with different life-spans.
Rupp revealed: "Next year we're planning to look at how fund managers address NAV adjustments as part of an overall review of the INREV Guidelines. Our aim is to offer additional guidance on best practice."
Stabilization in the number of funds adopting the INREV Guidelines on reporting reinforces the high standards being maintained across the non-listed real estate funds industry.
"The INREV Guidelines have become the industry standard for reporting, corporate governance and information disclosure. Our aim now is to continue to refine the Guidelines so fund managers can improve the effectiveness of their reports and be more transparent to investors," concluded Rupp.
Source: Firstlight PR