European real estate association INREV has launched its anticipated asset-level index and also announced the creation of an index to track open-ended core funds.
INREV launched the indices at its annual conference in Venice today.
While INREV’s ambition to create a quarterly pan-European Asset Level Index has been know since July 2017, the creation of a pan-European core fund index had not been publicly communicated.
The INREV European Open End Diversified Core Equity (ODCE) Fund Index, which currently tracks 12 funds with €24bn in assets, is similar in name to NCREIF’s NFI-ODCE index.
The long-established NFI ODCE is much larger, tracking 25 funds with $253bn of assets. The potential for Europe to replicate the size of the US market has been reported on previously by IPE Real Assets.
The launch of the asset-level and ODCE indices takes INREV into an area already occupied by index provider MSCI, which acquired real estate benchmarking company IPD in 2012. MSCI provides direct real estate indices, based on appraisals, and the MSCI Pan-Europe Property Fund index, which tracks 13 open-ended core funds in Europe with €28.5bn of assets.
INREV already has a number of fund indices, but it said the new ODCE index was likely to be the first that could be combined with the new asset-level index to link asset and fund-level attribution.
INREV said the asset-level index was “hugely anticipated by the industry” and already covered more 7,000 assets.
“The new index responds to an industry-wide requirement for a reliable and independently-managed asset performance indicator to track real estate market performance on an asset level across Europe, with greater granularity and consistency,” it said.
It is based on five years of historical quarterly data and is stripped of leverage and financial structuring. INREV said this provides “a deeper understanding of drivers of real estate performance and risk”.
It added: “This will facilitate improved peer-to-peer and cross-border comparability; and enhance decisions about portfolio allocation and risk management. The index will also help to reduce information asymmetry between investors and asset managers and improve alignment of interest.”
Lonneke Löwik, INREV’s CEO, described it is “a game changer for the non-listed real estate industry”, and said it cover €500bn of assets within five years.
“The larger it becomes, the greater the benefit it will provide in terms of the quality and breadth of data which, in turn, could play a significant role in helping to unlock increased capital inflows into non-listed real estate.
“The index also has the potential to become global, enhancing overall transparency of the industry.”
Matthias Pilz, head of investment strategy and investor relations at Allianz Real Estate, said: “The key benefits of the index will be transparency, comparability and consistency.
“By making headline data publicly available, it will contribute to the globalisation of standards and help to drive the cost of transparency down, which is a key factor in the development of the real estate industry.”
Nick Blakemore, director of portfolio analysis at M&G Real Estate and chair of the INREV Asset Level focus group, said: “The index will help in terms of assessing diversification strategy – the purity and richness of the data will help to provide a more complete and comprehensive view of the real estate market overall, compared to other asset classes. It’s brand new: new attribution, new analysis.”
