MSCI Inc. has launched the latest addition to its real estate index suite as part of efforts to provide enhanced transparency for real estate investors in Asia-Pacific. The MSCI/APREA Pan-Asia Quarterly Property Fund Index (Unfrozen) (APFI) was launched in collaboration with the industry body Asia Pacific Real Assets Association (APREA).

Varun Malik, head of APAC real estate client coverage at MSCI, says: “As our recent report on the real estate market size shows, the global market continued to grow in the face of disruptive and transformative trends accelerated by the Covid-19 pandemic, underscoring investors' resolute search for returns. We have seen demand for an efficient, transparent tool for benchmarking the performance of asset increases in line with this.”

As investors increase their exposure to private real estate, many have sought to diversify their holdings globally, with some turning to pan-regional investment vehicles, helping investors quickly gain diversified international exposure. Such pan-regional, core, open-ended funds are long established in the United States and are developing rapidly in Europe, but they remain nascent in Asia-Pacific, MSCI says.

As of December 2020, unlisted private real estate funds comprised only 19% of the institutional real estate market in Asia-Pacific. Within this segment, the market for pan-regional, quarterly valued funds was miniscule, at only 1%.

Such funds’ exposures can be significantly different from the overall market, which consists of assets held in a variety of investment vehicles by a range of managers and investors with diverse investment objectives and strategic focus. Investors are in need of appropriate peer-group benchmarks which allow them to gauge the performance of their diversified fund investments.

According to MSCI, the APFI is a peer-group index designed to provide a competitive set to better understand and benchmark performance, analyze integrated property and fund-level data, and evaluate intra-year, in-region market indicators.

While broad-market property indices are very useful to gauge a portfolio's underlying property performance against a broad measure of the investment opportunity set, more focused peer-group benchmarks allow comparison with a competitive set of funds competing for capital from investors. Tracking both property-level and fund-level returns, and reconciling the two, helps investors understand the complex variety of return drivers that impact such pan-regional funds.