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Europe's largest LPs urge managers to provide greater transparency

Some of Europe's biggest investors have thrown their weight behind industry efforts to create and expand a performance index.

Europe’s biggest institutional real estate investors have appealed to non-listed property fund managers to support the drive to build a robust investment performance benchmark for the industry.

Backing efforts to expand the index by INREV, the European Association for Investors in Non-Listed Real Estate vehicles, LPs say it is has been difficult to separate out the best performing managers given the recent bull-run in property values. They also say greater transparency would help managers market their funds.

Patrick Kanters, managing director for global real estate at Dutch pension fund APG (formerly ABP), which has €20 billion of property under management, said: “INREV has made great strides in bringing transparency to the market, but the INREV Index is not yet mature, we need longer data time series and more managers to disclose the information on their funds.”

“For fund managers, participation is an important way to sell their product. We would also be far more comfortable with a robust performance benchmark, because with the strong market and yield compression of the last few years, it is difficult to separate out the value provided by the manager,” he added.

The index measures annual net asset value-based performance for institutional and retail non-listed property funds investing in Europe. In 2006, it covered 206 funds with a total net asset value of €153 billion and has sub indices by country, property sector, vintage and gearing levels, but investors are saying more needs to be done.

Michael Nielsen, managing director and partner at Denmark’s ATP Real Estate, which has allocated €1.53 billion to the non-listed sector, said the non-listed property funds industry had to compete for institutional capital with other investment asset classes such as equities and bonds, which already have comprehensive and long-term market indices.

ATP questions fund managers on whether they are prepared to deliver the data to INREV before it commits capital.

Nielsen said: “When our asset liability management people consider allocating money to real estate it is difficult for us to provide them with data showing how the asset class has performed over a long period. So we believe it is absolutely crucial managers deliver their data to INREV.”

Michael Morgenroth, member of the board of Germany’s Gothaer Asset Management, which has €2 billion invested with non listed real estate funds, said: “Ultimately it would be good to have an index which is segmented according to investment styles, because you cannot really compare core and opportunistic funds' performance. As an investor you want managers who are generating 'alpha' and to be able to measure them against an index, which is nearly impossible at the moment.”

INREV's chief executive Lisette van Doorn said developing a reliable performance benchmark will be the only solution to properly measuring risk of non-listed funds going forward.