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FoF performance rebounds after lean post-GFC years

Real estate funds of funds recorded total returns of 8 percent in 2014 – the highest since 2007 – according to the latest figures from industry associations INREV and ANREV.

The performance of non-listed real estate fund of funds rebounded sharply after a poor showing in the aftermath of the global financial crisis, said a study released jointly by The European Association for Investors in Non-Listed Real Estate Vehicles (INREV) and the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV).

According to the latest figures from the ‘Fund of Funds Study 2015,’ non-listed real estate funds of funds recorded total returns of 8 percent in 2014 – the highest since 2007 and a massive rise from 2013 when performance hit just 0.2 percent.

“These statistics should go a long way to restoring investor confidence in the diversification benefits of funds of funds and renew their enthusiasm for these vehicles as part of a balanced allocation to non-listed real estate,” commented Henri Vuong, INREV director of research and information.

Global funds of funds delivered the highest returns for 2014 at nearly 12 percent, while returns for funds of funds targeting non-European markets rose to just shy of 10 percent – the highest since 2011. Fund of funds with a European strategy recorded a total performance of 5.2 percent – a huge jump from the -5.1 percent achieved in 2013.

It was not all positive news, however, as funds of funds focused on the Asia Pacific region trailed other regions with returns at -3.3 percent in 2014.

“Global funds…are also able to access sectors and regions at different points of the investment cycle, avoiding potential downturns in one region in favor of other preferred opportunities,” commented Catriona Allen, fund manager at Aviva Investors Global Real Estate Fund of Funds.

Again closed-end funds of funds outperformed their open-ended counterparts, with total returns of 8.9 percent and 7.8 percent, respectively, continuing a trend that has been consistent since 2009.

The study also revealed that funds of funds performed differently based on their risk profiles. In 2014, core funds of funds delivered returns of 8.8 percent versus 5.4 percent for non-core.