EUROPE - European institutional investors called on real estate investment managers to deliver clearer, pro-active communication and reporting, especially on key areas that would ultimately determine the success or failure of a fund.
Speaking at last week's IPE Real Estate Investor Forum & Awards in Amsterdam, part of the IPE/IPD Real Estate Congress 2010, Edwin Meysmans, managing director of Pensioenfonds KBC in Belgium, said he was disappointed by the lack of proactive communication from fund managers experiencing problems during the downturn.
He said some fund managers should have relayed issues in funds to investors immediately rather than to stall and hide problems.
"We read papers, we know there are problems. We can take bad news," Meysmans said, adding that he would prefer managers to call directly about problems than for the pension fund to read about it in the next quarterly report.
He added that in his experience the trend had been more discernible among real estate managers compared with managers in the traditional private equity sector.
Søren Schjødt-Hansen, group treasurer at Finanssektorens Pensionskasse (FSP) in Denmark, said he was happy receiving concise, periodic communications from managers about issues at the high, strategic level, but he wanted to have the ability to drill down if needed.
He added that investors needed to remain close to fund managers to ensure there wasn't any ‘style-drift', whereby managers start investing in opportunities that fall outisde their area expertise or the fund's established strategy.
Meysmans revealed that Pensioenfonds KBC uses INREV reporting guidelines, which he described as a very complete checklist, and asks all managers to comply with these. He added that the guidelines should be extended by the European Association for Investors in Non-listed Real Estate Vehicles to cover fund of funds managers as well.
However, Paul Clark, director of investment at the Crown Estate in the UK, said it was of utmost importance for the manager to communicate clearly on "a small number of key factors" that will determine whether the fund is ultimately successful, rather than focusing on maintaining good communication levels across all issues.
The key issues, he said, were more often than not timing, leverage and exit strategies, and not lease lengths and the price per square foot on underlying assets.
Clark also said it was important for investors to communicate what they wanted, rather than simply relying on the manager to report what is important.