Fund of funds fee structures lower than for direct funds: INREV

Overall fund of funds fee structures are simpler and lower than for direct funds, according to the inaugural Fund of Funds Fee Study published last week by INREV, the association of non-listed real estate investors.

Nearly half of the fund of funds polled in the survey base their annual management fees on net asset value, with an average of 0.4%. Performance fees are also common across value added and opportunity fund of funds, but less so in the core market, the study found. While all funds reported an annual management fee, these varied considerably for a number of factors including date of launch relative to the market cycle and fund structure.

'The fund of funds industry welcomes this opportunity to give investors an invaluable insight into fee structures,' said Antonio Alvarez of Aberdeen Asset Management and Chair of the INREV Fees Committee. 'Fund of funds give investors a cost-effective access to markets where they lack the resources or expertise to make direct investments. However, we must not be complacent and recognise that there is an need amongst investors for the fund of funds industry to further improve transparency in areas such as total expense ratio.'

The INREV Fund of Funds Fee study includes details from 34 non-listed real estate funds targeted by institutional investors. 'This report, the first of its kind, covers 80% of fund of funds in the INREV universe,' said Lonneke Löwik, Director of Research and Market Information. 'This strong support from the industry shows us that fund of funds managers are willingly embracing both this opportunity to share knowledge but also to demonstrate their commitment to transparency.'