UNITED STATES - The Pension Real Estate Association (PREA) and Investment Property Databank (IPD) are to co-sponsor a real estate fund index in the US.
The new benchmark will track the performance of open-ended US real estate funds against the underlying direct property market, highlighting any value added by active management.
The PREA/IPD US Property Fund Index, which is scheduled to launch in August, will cover funds across the risk spectrum, both sector-specific and diversified.
Over the past year, IPD has been collecting data from its clients and developing the analytics that will tie together fund-level performance with the underlying assets. The benchmark factors in additional fund activities including leverage and the maintenance of cash balances.
Under its agreement with IPD, PREA's 690 members will have access to underlying data on performance and risk across location and property type.
IPD said it had developed the benchmark in response to demand from pension funds and fund managers for greater transparency.
Jim Valente, director of performance and risk analytics at IPD North America, said: "Our experiences tell us that this is a global - not just US - trend and is not limited to the real estate sector.
"All types of investors made what they thought were informed decisions in the last cycle, only to realise that they were missing critical information that led to disappointing performance during the downturn."
Valente added: "The resulting current push for increased transparency is a result of these experiences and will continue to drive significant changes in what is the acceptable level of transparency, and how managers measure and benchmark performance."
IPD plans to include the US index in a global benchmark currently in development - a move designed to make the performance of US funds consistently measurable against their global counterparts.
"While we still have work to do on this front, we are making progress, and an investable fund index in the US that is consistent with our fund indices around the world is a big part of this initiative," said Valente.
Asked about the co-sponsorship agreement, Valente said PREA's mission - which includes the exchange of information - was "wholly consistent" with IPD's goal to increase real estate market transparency globally.
"The significant overlap between our clients and PREA's membership will also help the index become an invaluable tool for managers and investors," he added.
IPD has already developed a pan-European property fund index and indices specifically for the UK, France, Germany, Italy, the Nordics, and Australia.
