Funds of funds delivered a record 18.7% total annual return last year, according to INREV.
The industry body’s Fund of Funds study for 2016, jointly published by INREV and ANREV, found that returns were almost double INREV’s annual index return of 9.7%.
The return comes despite earlier indications that funds of funds were investors’ least preferred option for capital allocation to real estate.
Henri Vuong, INREV’s director of research and market information, said “subtle changes in scale and structure suggest greater alignment between investors and fund managers”.
She added: “This is all reflective of a general market sentiment that’s tilting more and more toward increased control of risk and greater transparency.
“It’s a mood that will only intensify in the continuing climate of economic and political uncertainty.”
The return is the highest since before the financial crisis and up from 8% in 2014.
Though performance was not equal across vehicle size, geographic region, style, structure or vintage, there was a consistent improvement in performance for virtually all types of funds of funds, the study found.
Large vehicles, with NAV in excess of €300m, returned 22.1%, while core funds returned 20.4%.
The study found that open-ended funds returned 19.4%, and that funds following a global strategy returned 26%.
Core vehicles made up most of the combined INREV and ANREV universe, representing 71.8% of the total NAV for funds of funds.