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Anrev says investors demanding more transparency
Fund managers told 45-day waiting period no longer acceptable
Bayani S Cruz 18 Nov 2014

Several years after the global financial crisis, the lack of transparency continues to be a major concern for institutions investing in non-listed real estate despite substantial progress in some areas. Improvements in best practices are being pushed by new regulations and these in turn drive the need for such clarity from the investors.


Anecdotal evidence shows that fund managers are responding positively to these new demands. Some institutional investors are now demanding “flash” (or quick) net asset value (NAV) numbers from their fund managers. With this, some fund managers are now providing “estimated” NAV numbers even before the requisite end of the quarter or three-month reporting period. Prior to the crisis, it took weeks after the end of this period before the NAV becomes available.


One of the big changes post crisis is that the waiting time for getting financial information, such as NAV, from the fund managers to the investors is cut shorter.


For example, it took one particular global fund 45 days from the end of the quarter to report their NAV. But because of demands from their investors, it was forced to overhaul its back office operations and capabilities to allow quicker processing of required information and get it to the investors faster. Today, the same global fund manager provides its investors with the estimated NAV before the end of the quarter.


This is an interesting change seen after the financial crisis since it shows that investors are putting pressure on their fund managers, as they note the 45 day waiting period is no longer acceptable.

 

 
Dalgleish: More regulatory burden has increased concern for transparency  

PGGM, a major Dutch pension fund, has made it a practice to include an annotation in their commitment note to their fund managers that they must provide data to the industry bodies before they invest in the fund manager’s fund.


Apart from investors, the principal beneficiaries of the increasing pressure for enhanced transparency on non-listed real estate investments are the industry bodies which gather, collate and monitor data such as the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV) based in Hong Kong, its Euro counterpart, the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) in Amsterdam, and Pension Real Estate Association (PREA) in Hartford, Connecticut in the US.


“The regulatory burden has increased post crisis so there’s much more concern for transparency than there used to be. If you look at it by countries, our members are generally interested in three locations for different reasons, namely Australia, Greater China and Japan. They’re also looking at Singapore, Hong Kong, and India,” says Alan Dalgleish, chief executive of ANREV in an interview with The Asset.


The membership of ANREV is made up of global pension funds and institutional investors as well as fund managers with conservative views and long-term horizon in terms of investment strategies. For this reason, they are fairly risk averse and do not normally invest in new and relatively high-risk markets such as Vietnam, Laos and Myanmar.


At the same time, demand for non-listed real estate continues to grow. Based on the 142 participants of the 2014 investment intentions survey published by ANREV at the beginning of the year, about 63% of investors in non-listed real estate are from Europe, 19% are from Asia-Pacific and 18% are from the US.


The 142 survey participants represent US$495.7 billion in total assets.


According to Dalgleish, the survey results point to increased investor confidence in the non-listed real estate sector with average real estate allocations projected to rise from 9.5% to 10.3%, indicating that investors seek to invest x35 billion (US$ 44.4 billion) in 2014. Just under half of investors are expected to increase their exposure led by those from Asia-Pacific.


“The preference for non-listed real estate funds remains stronger with smaller investors, with larger investors preferring joint ventures and club deals. Real estate debt remains popular with a quarter of investors expecting to increase their allocations to this area, particularly among the larger investors. Core funds remain the most popular, with larger investors having greater interest in value added,” Dalgleish observes.

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