INREV last week launched its inaugural performance index for non-listed European property funds. This was unveiled at its first Annual Conference in Budapest. The launch of the index is a major strategic step both for INREV and the indirect investment industry and marks the increasing importance and size of this growing sector of the European real estate market.
It is INREVâs intention to increase both the number of funds surveyed and the frequency at which the Index is published, so that it ultimately becomes the quarterly pan-European benchmark of record. The index will remain unfrozen for the foreseeable future, which allows for additional vehicles to be added to the index.
In collating the performance data for 2004, INREV and IPD surveyed 87 funds in Europe across 7 countries, representing a total Net Asset Value (NAV) of â¬72 billion. Within that figure, the Index identifies that:
- The UK accounts for the largest number of surveyed funds, with 40 respondents, including 37 funds in the HSBC/APUT index; the total NAV of UK funds surveyed was â¬21.7 billion. The Netherlands had the second largest total, with 15 funds and total NAV of â¬ 7 billion.
- The majority of funds surveyed (76 of 87) are currently focused on one country.
- Diversified funds account for â¬23 billion of the total NAV, whereas funds focused on a single sector account for â¬28 billion of total NAV.
Returns â" country specific
The 2004 Index revealed the following top five country-specific periodweighted returns for domestic funds in local currencies: (Rank - Country - 2004 returns %)
1 UK - 19.72
2 Portugal - 12.59
3 Netherlands - 8.98
4 Italy - 6.64
5 Switzerland - 4.94
Returns â" sector specific
The 2004 Index revealed that funds invested primarily in Industrial assets outperformed all other specialist asset classes: (Rank - Sector specialization - 2004 returns %)
1 Industrial - 16.93
2 Retail - 11.25
3 Residential - 9.75
4 Diversified (all sectors) - 3.73
5 Office - 2.85
Funds invested in Industrial assets have been the top-performing sector in the INREV index in three of the four years surveyed (2001, 2002 and 2004). In 2003, the highest returns were generated by Residential funds (10.79%).
NAV â" sector specific
Diversified funds, with assets from all sectors, constitute the greatest part of total NAV of the 87 funds surveyed for the 2004 Index. (Rank - Sector specialization - 2004 NAV ( â¬ bn))
1 Diversified - 23.1
2 Office - 15.8
3 Residential - 5.6
4 Retail - 3.6
5 Industrial - 2.6
The main component of the Diversified category is open-ended German funds.
Distribution, as % of NAV
The highest distributions, as a percentage of total NAV, are provided by funds based in the Netherlands (7.24%); the lowest distribution yield is from Portuguese funds (1.71%): (Rank â" Country - 2004 Distribution %)
1 The Netherlands - 7.24
2 UK (excluding HSBC/APUT) - 6.96
3 Germany - 6.68
4 Pan-European (excluding vehicles for retail investors) - 4.77
5 Switzerland - 4.56
Gearing, as % of NAV
The highest gearing as a percentage of NAV was found in some pan-European opportunity funds (89%); the lowest in the German open-ended funds (13.34): (Rank - Country 2004 - Gearing %)
1 Europe (excluding vehicles for retail investors) - 88.9
2 UK (excluding HSBC/APUT) - 69.3
3 Portugal - 49.6
4 The Netherlands - 38.6
5 Switzerland - 27.4
Commenting on the 2004 Index, Philip Rose, Co-chairman of INREVâs Benchmarking and Performance Measurement Committee, said: âThe launch of the INREV Index, which provides performance transparency for â¬72 billion of real estate funds across Europe marks a significant step forward for the industry. The increasing appetite of investors around the world for non-listed real estate investment vehicles has been matched by their growing sophistication. As a result, the requirement to develop more effective benchmarking tools, along with greater transparency and liquidity, has been a key concern and a challenge which INR