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Inrev launches non-listed real estate funds of funds directory

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Inrev, the Amsterdam-based European Association for Investors in Non-listed Real Estate vehicles, has launched a real estate fund of funds directory, which aims to provide for the first ti

Inrev, the Amsterdam-based European Association for Investors in Non-listed Real Estate vehicles, has launched a real estate fund of funds directory, which aims to provide for the first time a comprehensive overview of this rapidly evolving sector of the non-listed property investment world.

The directory comprises of 36 funds of funds with an approximate total target equity of EUR10.9bn. Six of these funds did not give a target equity figure, but Inrev estimates the total size of the database to be around EUR12bn. The association also estimates that the database covers 80 per cent of the market in Europe and the majority of Asian funds of funds, but that numbers in the US could be significantly higher.

Of the EUR10.9bn in equity, around 68 per cent or EUR7.4bn is targeting Europe, 17 per cent or EUR1.8bn is looking at Asia, while 4 per cent or EUR400m is allocated to investment in US vehicles. The remainder is targeted at Australia or single country funds.

‘The majority of the funds of funds that we have now captured in the Inrev database are targeted at Europe, as would be expected, but there is also robust growth in Asia,’ says Inrev research director Andrea Carpenter.

‘This shows that the Asian investment market is leapfrogging the historical evolution in Europe. Unlike in Europe, where the rise of the underlying non-listed real estate funds was followed by funds of funds, both forms of vehicles are developing in parallel in these emerging markets. The funds of funds targeting Asia tend to be smaller, but the speed at which they are growing is impressive for such a young market.’

Some 29 of the funds in the directory are accessible to institutional investors only, while seven are available to both institutional and retail investors. Of the total 36 funds of funds, 11 are currently closed to investors while 25 are still open. Closed-ended funds of funds make up 22 of the total, with 14 open-ended vehicles. On average, they have invested in 10 underlying funds, but the median target to invest in is 14.

The office property sector is the most popular investment area and accounts for 36 per cent of the directory by number of funds, followed by retail at 30 per cent, industrial/logistics at 18 per cent, residential at 9 per cent and other real estate sectors at 7 per cent.

There has been a steady rise in the number of vehicles being launched since the first in 2003, with four in 2004, six in 2005 and 10 in 2006, peaking at 14 so far this year. One fund of funds planning to launch in 2008 is included in the directory.

The average target internal rate of return is 12.1 per cent, derived from the various investment styles of the underlying funds being invested in. Of the total target equity in funds of funds where managers indicated their investment strategies, EUR3bn will target core vehicles, EUR5.3bn value-added and EUR2.1bn will look to invest in opportunity funds.

Average total gearing for the underlying funds within the portfolios is 56.5 per cent, but additional leverage at the fund of funds level was only reported in six vehicles in the directory.

‘For big institutional investors wishing to access niche managers, or smaller and medium-sized pension funds entering the market on a diversified basis for the first time, these vehicles may offer an attractive investment option,’ says Inrev chief executive Lisette van Doorn.

Inrev was launched in May 2003 to act for investors and other participants in the growing non-listed real estate vehicles sector. The organisation seeks to provide a forum for the sector and increase the transparency and accessibility of non-listed vehicles; to promote professionalism and clarify best practice and to share and spread knowledge.

Inrev currently has 258 members among institutional investors, fund managers, promoters and advisors in Europe and beyond. There are 60 investor members of Inrev with real estate assets under management of more than EUR100bn.

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