A study into funds of funds has revealed the strongest returns to date notching up 18.7% annual returns, continuing the universe’s three-year growth trend.

Notable performances among the 65 INREV and ANREV vehicles, were achieved by large funds with NAV in excess of €300m at 22.1%; core funds at 20.4%; open-end funds at 19.4%; and funds targeting a global strategy at 26%.

The annual study, jointly published by INREV and ANREV, highlights the relative attractiveness of these vehicles despite the Investor Intentions Survey 2016 suggesting that they were their least preferred option in terms of capital allocation to real estate.

Large, core funds of funds dominate

Commenting on the study, Henri Vuong, INREV’s director of research and market information said: “Seemingly, this report highlights the predominance of large, core funds of funds focussed on global and European strategies.  It also sheds light on subtle changes in scale and structure that suggest greater alignment between investors and fund managers. 

“This is all reflective of a general market sentiment that’s tilting more and more toward increased control of risk and greater transparency.  It’s a mood that we believe will only intensify in the continuing climate of economic and political uncertainty.

“INREV’s response is to continue to drive greater standardisation of industry best practice, reporting and performance benchmarking, globally.”

Open end vehicles account for 71.4% total NAV

Core vehicles make up the majority of the universe by value, representing 71.8% of the total NAV for funds of funds.  Equally, there is a dominance of open end vehicles which currently account for 71.4% of total NAV, while vehicles following a global or European strategy command an overwhelming 86.2% of total NAV. 

On average, core vehicles have lower blended gearing levels of around 41.4%, as well as higher average capital commitments at €32.2m of equity compared with €19.5m for value added and €18.7m for opportunity funds.

Performance figures in the study are based on a reduced sample of 25 funds of funds with a total NAV of €6.5bn, which is 67.5% of the total value of the universe.