GLOBAL- European non-listed real estate funds are rapidly making their fee structures more transparent for investors and fund managers, according to the latest research by the European Association for Investors in Non-listed Real Estate (INREV).

INREV's fifth annual management fees and terms study found 86 of the 243 non-listed property funds questioned were providing investors with some form of Total Expense Ratio (TER) reporting, which shows the annual operating costs of a fund in proportion to the value of its assets and gives a fairer comparison of costs between funds.

"We've seen a big increase in the number of funds providing detailed information on their fees," said Andrea Carpenter, acting chief executive for INREV.

"This demonstrates a growing appetite in the non-listed property funds industry to understand fees, terms and costs for different structures and improve overall transparency in this area."

Of the 86 funds which gave investors TER reporting, 55% were reporting INREV TER, which was released as part of the INREV Fee Metric Guidelines in September 2007.

Neil Turner, chairman of INREV and head of fund management at Schroder Property Investment Management, said: "The rapid adoption of INREV TER in the first year since its launch indicates that there is increasing demand for this type of information among institutional investors. Fund managers have also seen the benefit in reporting fees to their clients using a standard industry format."

There are however, huge variations in the bases on which fees are charged and the definitions of the fee items charged.

"Transparency is improving but there is still further work to be done to improve consistency of reporting bases and fee terms by managers. This could include looking at encouraging fund managers to streamline the number of fee items charged and improving the underlying definitions of those items,' said Turner.

Amsterdam-based INREV will continue to work with its member to address this in 2009.

Of the funds survey, 84% charged an annual management fee, of which 61% based the fee on Gross Asset Value. However, some funds used other common bases like the net asset value (NAV), committed capital and drawn capital, which hinder comparison between funds.

Opportunity funds use the most varied bases for their fund management fees, preferring committed capital.

And the average fund management cost based on committed capital is 1.37%, but there is no comparable GAV figure for opportunity funds. The average fund management fee for core funds with a lower risk/return profile was 0.59% of GAV and 0.65 of value added.

The 243 funds included in the study had a total Gross Asset Value (GAV) of €145bn and were distributed across 67 fund managers.

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