After more than three years of collaboration between 30 member organizations on both sides of the Atlantic, INREV launched its new pan-European Asset Level Index this month.
Featuring five years of quarterly data for more than 7,000 assets – valued at roughly €150 billion – the index is intended to help investors make informed decisions.
The data sets delivered by the index will be stripped of leverage and financial structuring, which “will facilitate improved peer-to-peer and cross-border comparability; and enhance decisions about portfolio allocation and risk management,” INREV said in an announcement. “The index will also help to reduce information asymmetry between investors and asset managers and improve alignment of interest.”
Some are also looking to the non-profit-managed database to offer a cost savings relative to other data services. Data-providing members will have access to the fund for €7,500 a year – after a one-year free trial – while non-data-providing members will have to pay €15,000 annually for access.
One European investor said many of the institutional investors he represents have grown weary of sharing data with third-party sources only to be charged a fee to access the full data set.
“Data they had provided before suddenly became commercially inaccessible and I think there was a bit of frustration from that perspective,” the investor said, adding that “cost is a very important topic” with his clients, most of whom are pension funds.
Olivier Teran, chief investment officer of Allianz Real Estate, the investment arm of the German insurance company, said the index’s data also allows investors to compare asset performance across geographies, sizes, property types and life cycles all in one place, features not offered elsewhere, he added.
“The main benefits fall within transparency, comparability and consistency rather than cost,” Teran tells PERE. “The index will give us better insights into the performance of our asset class as we are now able to analyze our performance versus the market in a granular way.”
While there has been an increasing appetite for transparency among European investors in recent years, the region has faced inherent hurdles, Henri Vuong, INREV’s director of research and market information, told PERE. Chief among those are the disparate standards for evaluating performance between managers and differing valuation practices country to country.
INREV aims to negate these differences and focus on underlying cashflows, Vuong said. With uniform standards, investors are free to “drill down on the characteristics” of each asset, she said.
Teran said the Asset Level Index “provides a level playing field” that benefits not only Allianz’s own decision-making but also its advisory services to clients, which have grown steadily more multinational. “Many of them are at a size where comparison to a European-wide index across a number of granular factors provides them with a better understanding of where value sits in their portfolio,” he said.
The property types within the index include office, multifamily and industrial as well as alternative classes such as healthcare, student accommodations and parking. It has exposure to 20 countries, Vuong said, with plans for greater expansion moving forward.
Investors began nudging INREV to create a comprehensive real estate performance database in the summer of 2015 and a consortium of 30 members – including the association’s US counterpart, NCREIF – was assembled that fall. Vuong said the group held weekly calls to hammer out the details.
The unnamed investor told PERE that he considered the index to be an immediate research tool providing insight into specific strategies and anecdotal evidence about wider market trends. However, he said, it will have to produce consistent results before it can be relied on to benchmark success.
“The proof in the pudding is always in the eating,” he said. “This moment in time, it’s … a comparable point of view on what like-minded investors with institutional-grade products are achieving.”