INREV's new index analysis tool offers a flexible top-down performance measure for the property funds sector and helps investors to compare performance of their non-listed allocations with their specific direct and listed portfolios. Casper Hesp explains

Performance benchmarks are a common feature of the investment world so it is no surprise that a maturing industry such as the non-listed real estate funds market would look to have similar tools. This is especially the case with the market downturn as investors and fund managers increasingly look to performance benchmarks to understand and evaluate performance.

INREV has taken some major steps to create such a benchmark with the development of the INREV Index. For the 2008 release, INREV represented 224 funds and €117bn gross asset value (GAV).

In addition, INREV has created two online tools to support its use and value to the industry. First, INREV has made it easier for fund managers to deliver performance data on individual funds with the creation of an online input tool. Fund managers can access this new user-friendly system via a password-protected part of the INREV website. It replaces the separate Excel questionnaires used in previous years.

Second, INREV is launching an Index Analysis tool which can be used to create tailor-made indices from the INREV Index. This tool allows users to specify the characteristics to create sub-indices such as vintage, gearing, size, style and structure. For vintage, gearing and size it is possible to select specific ranges. For example, funds can be analysed with a launch year between 2005 and 2007 which have a gearing level between 30% and 60% and are €250-500m GAV.

Another part of the tool allows users to select the target country/sector strategy of the fund as well as the actual country/sector allocations. It is also possible to specify which countries should be excluded. For example, if the user would like to see the results of all multi-country funds investing in UK but with no exposure to Germany the user can select the UK in the invested in section and Germany in the ‘not invested in' section.

Finally, users will be able to select the output they would like to see. They can choose to see the total return results, capital growth, income return, target and actual country/sector allocations, number of funds, total NAV, annual distribution yield, average total gearing, period returns and the currency in which they would like to see the results (local currency, euro, sterling, dollar).

In line with existing index confidentially rules, any peer group created should include at least three different funds from at least three different fund managers. All these results will be presented on the screen and can easily be printed or exported to Excel.

Fund managers who submit information will also be able to take comparison one step further by comparing their own fund performance with the tailor-made indices within the analysis tool. If the fund managers deliver data to the INREV Index they have an extra option in the program to make these comparisons.

The comparison sheet comprises two pages. The first includes all information on the fund itself and the information of the peer group specified. For the fund itself the total return, capital growth, income return, total NAV, total GAV, gearing and distribution yield are presented. For the peer group analysis, the same results are published, including the number of funds in the peer group and the quartiles results of the total return.

The sheet also includes a graph with the performance of the fund, the performance of the peer group and the number of funds in the peer group. The second sheet includes information on the target and actual country/sector allocations of the fund itself and the peer group. The two sheets can also be printed or downloaded to Excel.

All these options makes the new INREV Index Analysis Tool an important device to analyse fund performance. It offers the industry a flexible tool to analyse a ‘top-down' performance measure for the property funds sector and gives investors a valuable first-step tool to help compare performance of their non-listed allocations with their specific direct and listed portfolios. With the option to analyse fund
performance against other peer groups, the non-listed property fund industry can now take another big step in increasing the transparency and information available.

Especially in times of market downturns, the reporting of performance figures for the industry is particularly crucial as the availability of reliable and transparent performance data becomes increasingly important. INREV is determined to keep up the transparency of information on the non-listed property funds sector during changing market conditions but the support of fund managers and investors is needed to do this.

The collection of data for the INREV Index of 2009 will start in the first week of February and results will be published during the Annual Conference of INREV in April 2010.

Casper Hesp is research manager at INREV