ASIAVIEW: ANREV sheds first light

Jonathan Brasse

Two years after tipping it, the Asian Association for Investors in Non-Listed Real Estate (ANREV) has finally revealed Asia’s first industry performance measurement tool for non-listed funds. For some managers, the index couldn’t have come soon enough.

At last month’s Asia roundtable (see Rebuilding the case for Asia, starting on page 42), the six GPs that convened in Singapore talked of increased requirements from their investors for more information, particularly in the area of benchmarking. Mark Gabbay, LaSalle Investment Management’s chief investment officer for Asia and one of the roundtable participants, said: “Everyone has good deals and bad deals, but it’s hard to say on a net basis where the region actually stands as there are limited benchmarks.”

The introduction of ANREV’s index in late October has gone someway to addressing the issue. The association’s research director Clara Lee told PERE that the index, while still in “consultation” format, was comprehensive enough for certain GP members to include its findings in their research. More significantly, certain LP members have intimated that they would include it when forging their outlook for the region.

Everyone has good deals and bad deals, but it’s hard to say on a net basis where the region actually stands as there are limited benchmarks Mark Gabbay, LaSalle Investment Management

“They agreed it is reflective of how the industry has performed over the past four years,” said Lee. That is quite an endorsement for an index that reflects just 30 percent of the Asian real estate fund manager universe, which ANREV has measured as managing approximately $245 billion of real estate across 268 non-listed property funds.

The index itself found that the 42 funds, the details of which were submitted by firms that include Angelo, Gordon & Co, Tishman Speyer and LaSalle, returned 9.8 percent in 2010, bringing the industry’s performance back into positive territory for the first time since 2007, before the start of the global financial crisis.

ANREV made a point of demonstrating that the return in Asia ex-Japan in 2010 was a far more impressive 17.6 percent, as opposed to Japan’s negative 17.6 percent in the same period. It was an important distinction to make as 45.9 percent of the funds in the sample pool were Japan-focused and, unmade, could have left a somewhat skewed outcome.

Lee acknowledged the disproportionately large number of Japanese funds reflected in the index’s first results and predicted that the country’s proportion would decline as the index evolved. “As our coverage improves, I expect that percentage to come down,” she added

Other countries represented in the index included Singapore (14.8 percent), China (12.9 percent), Hong Kong (7.1 percent), South Korea (5.6 percent), Malaysia (4.7 percent) and India (2.2 percent). While Japan’s proportion is expected to decrease, Lee expected the Australia contingent (currently 4.6 percent) to grow markedly going forward. “[Australia] does make up quite a sizeable portion of the universe,” she said. “Once we start approaching the Australians, I expect the ratio will change.”

Another important observation from ANREV’s first index was that just 20 percent of the funds measured were opportunistic in nature. ANREV previously stated that 45.1 percent of Asia’s funds are opportunity funds. Given the region’s generally opportunistic real estate environment, those percentages also should appear increasingly closer in future publications of the index.

Teething issues aside, Lee is convinced that the right methodology and infrastructure is in place. ANREV seconded senior research manager Casper Hesp from sister association the European Association for Investors in Non-Listed Real Estate (INREV) for six months to direct the index’s construction. This resulted in INREV’s calculation methodology being imported.

More support still would undoubtedly see the index better reflect Asia’s non-listed fund universe. That said, ANREV’s first effort certainly has been welcomed.