EURO ZONE: More power to INREV

Just when fund managers in Europe are thinking about consolidating vehicles, the organisation that represents investors is becoming more independent.

Robin Marriott

INREV has been displaying many signs of this of late: running more of its own events, providing training days and even establishing a private company in the Netherlands for just that activity.

But the clearest sign of this newfound independence came just before Christmas.

INREV contacted the property data company Investment Property Databank (IPD) to inform it that it would no longer require its services in terms of managing and developing a database of funds or jointly establishing a performance index that benchmarks opportunity vehicles.

Thus, a five-year relationship went up in smoke. The decision ruffled a few feathers at IPD, but as INREV told PERE, the organisation has been expanding and can now do this work in-house.

There are certainly those within European private equity real estate that do not like INREV much, for a variety of reasons.

One of them is a fundamental issue – that private equity real estate is private. Being rounded up as one group and pressured into submitting performance data and other information on issues such as corporate governance and transparency does not sit well with them.

In addition, more and more surveys have been dropping into the inboxes of fund managers from INREV asking for information. Some fund managers that once filled them out are nowadays choosing to ignore them.

As PERE heard from one fund manager recently, there are even question marks over what INREV exists for. “Why does it feel it necessary to branch out into other areas of activity. Isn't it drifting too far from what it originally set out to be: a mouthpiece for LPs?” the manager asked.

The organisation was launched in 2003 as a “collective” to represent investors in the opaque area of unlisted funds.

As part of efforts to bring greater transparency to the industry, and indeed drag the asset class in line with other financial asset classes, INREV has made big strides.

The organisation has evolved sufficiently to wield some real power too: in negotiations between fund managers and limited partners, its guidelines are often raised, with some LPs saying they will not invest unless the sponsor fully recognises and adheres to them.

The ending of the relationship between INREV and IPD means the two organisations become direct competitors. But this is no bad thing. Each will bring forward separate tools for benchmarking opportunity and other property funds.

INREV has already started collecting data for the INREV Index, which will be launched later this month at the association's annual conference in Athens. The methodology has changed to reflect a fund's annual performance by collating information on capital calls and distributions on a day-dated basis.

In Athens, INREV will also launch the Opportunity Funds Consultation Index, which will be calculated using an internal rate of return methodology that better reflects higher risk return investment strategies.

For its part, IPD is developing a separate performance benchmarking system. This will be complimentary to INREV's efforts. The company recently told clients the European property market would benefit from “two parallel approaches”. From the global universe of pooled property funds, IPD will create indices for sub-groups of funds for both international and cross-border markets.

With these kinds of developments afoot, more power will be handed to LPs as they continue to search out the best managers.

And as several hundred investors prepare to make the trip to Athens later this month, they do so knowing the balance of power is swinging markedly in their direction.