GLOBAL - The larger the fund, the lower the management fee is the conclusion of an INREV survey of fees charged by 160 European non-listed real estate funds, except in funds with assets of €100—299m, as they levy the highest fees.

"There is of course economy of scale as funds grow," according to research director Andrea Carpenter, "but mid-range to larger funds may also be experiencing economies of scales from the fund manager point of view. The fund manager may have infrastructure in place which means that the additional funds it manages might have shared operational costs across the company.

"You could also argue that those with less than €100m under management would be run by smaller fund managers who are attempting to keep overhead and resources to a minimum. It may be that €100—299m is an awkward middle ground between these two."

Single-market funds in the UK and the Netherlands are said to carry the lowest annual management fees, according to the survey, and Carpenter confirmed the UK and Dutch results are "an indication of market maturity - from both the fund manager and investor perspective".

The INREV sample also found around 80% of funds levied performance fees, with opportunistic funds most likely to apply them. However, just 33 funds - 21% of funds polled - report a total expense ratio (TER).

However, Carpenter cautioned against inferring market changes from an overall increase in fees from 2006 - most likely a result of overlap among funds which appeared in both years' samples.

"This means comparisons are interesting but any market changes can't really be drawn from them," she said.