Un-listed real estate funds still find favor

The third annual Investment Intentions Survey by the European Association for Investors in Non-listed Real Estate Vehicles (INREV) insists the majority of investors prefer to increase exposure to property via un-listed funds.

INREV has found that over 70 percent of investors that responded to its 2007 survey say that they plan to increase exposure to non-listed vehicle as opposed to listed funds, direct property investment, or joint ventures.

The organization said: “Investors remain positive about real estate investment, with a substantially greater number likely to increase than reduce their allocations. Non-listed remains the most favoured route.”

However, in what might be an early sign of weakening appetite, the figure is markedly short of the 100 percent last year who said they would increase exposure in non-listed funds.

INREV admitted: “Unlike last year a small group are now expecting to keep constant or even decrease their allocation to un-listed property.”

Listed funds appear to be in the ascendancy with more than 40 percent saying they expect to increase exposure to property in such vehicles. INREV says this possibly reflects interest in REITs, which were introduced in the UK on January 1, and the increasing availability of securities fund of funds.

INREV garnered responses from 123 people for its research. Fifty-six were fund managers, 45 institutional investors, and 22 fund of fund managers.

“Access to expert management” and “international diversification” came out as the top reasons for investing in non-listed real estate vehicles.

However, in a further warning to the sector, lack of transparency and market information again ranked as the main disadvantage.

Hoping to tackle the on-going issue, INREV yesterday published the first pan-European framework for corporate governance in private real estate funds with ‘Seven Principles of Corporate Governance’.

Lisette van Doorn, chief executive, said: “The level of regulation for non-listed real estate funds is lower than in other investment classes. This, combined with the fact that the funds typically have low liquidity and entrepreneurial investment managers, leads to an established requirement for strong corporate governance.”

Other findings of the 2007 Investment Intentions Survey were:

  • Lack of suitable products is the second biggest disadvantage of non-listed funds;
  • Investors and fund managers prefer value added funds, while fund of fund managers prefer opportunistic funds;
  • Offices are the most favored asset among investors, retails is preferred by managers, and industrial is preferred by fund of funds;
  • Germany is the country most in demand;
  • Central and Eastern Europe is losing some of its appeal;
  • 63 percent say infrastructure is not real estate, although 30 percent say they are likely to invest in the asset class this year.