The 2010 INREV Management Fees and Terms Study has identified major differences in how fees are administered within non-listed real estate funds in Europe. The differences are predominantly driven by a fund's investment approach and regional or sectoral focus. The study has also found that fee levels reached their highest at the height of the market in 2007 and that less than a third of funds report total expense ratios (TER) to their clients.
"The study clearly shows that fees have come down significantly since the market height of 2007," said Lonneke Löwik, Director of Research and Market Information, at INREV. "Fund charges are broadly in line with what we would have expected with understandable variations between core, value-added and opportunity funds, but the percentage of firms reporting total expense ratios to clients (29%) is lower than we would like to see, and increasing transparency in this area is something INREV will focus on in 2011."
Active external asset management
The 2010 study also sought to focus on how fund managers are adding value through active external asset management. While there was a clear view that external asset management can be used to obtain 'best-in-class' asset managers in a specific region or property sector, the clear majority of funds (85%) reported using in-house asset management. Only 7% used external asset management while the remaining five percent reported using a combination of both.
"External asset management is more common amongst higher risk-return profile funds due to typically more challenging assets and the required active management style, " explained, Lonneke Löwik, Director of Research and Market Information, INREV.
"However, most investors prefer in-house asset management as it is perceived to be better linked with oversight and the reporting of expenses related to asset management."