Increasing numbers of non-listed real estate funds are providing more details on their fee structures, according to a new study from the European Association for Investors in Non-listed Real Estate (INREV).
Speaking to 243 non-listed property funds representing €145 billion in assets under management across Europe, INREV said almost one-third of firms were giving investors details of total expense ratios rather than just management fees alone. INREV guidelines recommend that funds provide the annual operating costs of a fund as a proportion of the value of its assets to help LPs compare costs between funds. Around 35 percent of those questioned, or 86 funds, said they were providing some form of total expense ration.
“[The study] demonstrates a growing appetite in the non-listed property funds industry to understand fees, terms and costs for different structures and to improve overall transparency in this area,” Andrea Carpenter, INREV acting chief executive, said in a statement.
However the survey found that despite increased transparency, there are still significant problems as to how fees are determined. When it comes to reporting annual management fees, the survey said, 61 percent were basing it on differing values, including gross asset value (GAV), net asset value, committed capital and drawn capital.
“Transparency is improving but there is still further work to be done to improve consistency of reporting bases and fee terms by managers,” Carpenter added, stressing managers should look to streamline the number of fees charged and improve the underlying definitions of fees.
The average fund management fee for value-added funds was around 0.65 percent of GAV, while lower risk strategies had average annual fees of 0.59 percent. Opportunity real estate funds used a variety of values to determine the annual management fee, the most common being committed capital, with the average management fee being 1.37 percent.