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INREV tweaks style definitions

A year on from launching the style classifications, INREV has revised the definition of a ‘core’ fund after some concerns from members.


INREV, the European Association for Investors in non-listed real estate vehicles, has tweaked the style definition of ‘core’ property investing a year after releasing the original classification.

The trade association said today it had refined key elements defining a core fund after some members had expressed concerns.

The latest iteration better reflects the true nature of a core fund with leverage and clearly marks the difference between this fund style and that of a value-added fund, it said in a statement.

Matthias Thomas, INREV chief executive officer, added: “We’ve evolved the INREV Style Classification because it’s the right thing to do. In March last year we introduced the new classification. Response from the industry was on the whole positive, however feedback from some members indicated concerns. We’ve acted on these concerns and adapted the model to better reflect the realities fund managers face.”

The classification of core funds is now based on three operating variables. Core funds have a target percentage of non-income producing investments at or below 15 percent, and have a target percentage of development exposure of no more than five percent. They also have a target return derived from income of at least 60 percent.

Crucially, though, the loan-to-value consideration is no longer being taken into account for classifying funds as core.

INREV said it had reviewed the leverage parameters to address concerns raised by some fund managers that a 40 percent ceiling was impractical for core European funds. This ceiling limited the flexibility required to pursue currency hedging and/or to explore different tax structures.

Under the refined classification, leverage parameters divide core funds into two sub-categories – less than or equal to 40 percent and more than 40 percent.

“These adjustments are subtle but significant. They provide a further layer of information around core funds for investors, and greater clarity on the leverage issue for fund managers,” said Thomas.

The classification for value-added and opportunity funds remains unchanged.