Non-listed property funds move towards consistent approach for reporting (EUR)

Adoption levels of the INREV Guidelines on reporting continue to improve among non-listed property funds, according to an INREV survey. The second annual Review of Reporting Best Practice shows that 81% of the 2008 annual reports surveyed had adopted the majority of the INREV Guidelines related to reporting compared to 73% in 2007. The number of funds applying at least three-quarters of the Guidelines doubled from 20% to 43% over the year.

"The results clearly show an increasing quality of annual reporting. At the same time, some elements such as net asset value seem to be in transition, moving towards a more common, consistent approach. However, this transition is not always directly leading to more transparency as many funds are providing this information for investors in parallel with their existing approach without the rationale behind the choices made. However, the INREV Guidelines are still relatively new and this progress represents major steps forward in only a short period," said Lisette van Doorn, Chief Executive of INREV.

The INREV Guidelines provide fund managers and institutional investors with a common set of principles, guidelines and recommendations for governance and information provision in relation to non-listed real estate funds.

Improvements have also been made in the disclosure of adjusted net asset value (NAV) calculations, which have become an increasingly important part of fund reporting. Nearly one quarter of funds surveyed stated that their adjusted NAV represents INREV NAV or is based on the INREV NAV Best Practice Recommendations.

"The improvements clearly reflect the current issues at play in the market with disclosures on net asset value, the property and financial reporting and debt issues in particular having significantly improved in comparison to last year," said van Doorn.

The results also highlight areas for improvement where adoption levels are currently lower. This includes property valuations with only 53% of the reports currently providing adequate information in this area, although this number is significantly higher than last year. In addition, fund disclosure on Fee Metrics still remains low with just over 25% of the sample disclosing a total expense ratio or other fee metrics-related items.

Jef Holland, Director at Deloitte and Co-Chairman of the INREV Reporting Committee, said "The results of the review help lay the foundation for further INREV initiatives to support adoption levels. This includes developing supporting material such as Q&A databases and best practice examples as well as upgrading the online accessibility of the INREV Guidelines. This will help fund managers explain the rationale behind the approach chosen, particularly with respect to net asset value."

The survey reviewed 60 non-listed property funds to examine current market practice in fund reporting and to assess how this relates to the relevant INREV Guidelines. The review concentrates on funds' annual reporting including Property Valuations, Net Asset Value (NAV), Fee Metrics and Annual Reporting.

Source: Madano

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