GLOBAL - Managers of funds of funds require greater transparency on fees from the funds in which they invest, according to Lonneke Löwik, INREV's director of research and market information.

At a press conference at this year's INREV CFO Conference in Copenhagen, she said: "Fee structures of funds of funds are generally simple. The problem is the fee structure of the funds they invest in is more complex and consequently less transparent.

"This is the transparency gap, and this is what we need to address. Investors want to see what they are paying for.

"Through our annual 'Management Fees and Terms' study, we have already come a long way in increasing the transparency and knowledge about fee practices in direct funds, but the link with funds of funds has not yet been made."

According to Löwik, the response to the study has been encouraging. The first of its kind, it examines the fee structures and fee levels of 34 non-listed real estate funds of funds targeted at institutional investors.

This covers nearly 80% of the funds of funds in the INREV study universe.

Löwik said: "This strong support from the industry shows us that fund of funds managers are willingly embracing both this opportunity to share knowledge, but also to demonstrate their commitment to transparency."

In response to a point raised at the press conference that investors would rather see all costs itemised in a single management fee rather than have a low management fee and then be presented with a series of additional costs, Löwik said: "Increasing manager compliance on the total expense ratio will resolve this - this is another major objective."

The study concluded that managers who can illustrate the costs associated with running a fund of funds clearly and transparently will be in a better position to negotiate fees that best align the interest of all parties.