ANREV management fees study shows continued commitment of Asia Pacific managers to transparency

The average total expense ratio (TER) of Asia Pacific non-listed real estate funds has increased slightly to 1.04 percent based on gross asset value (GAV) from 0.97 percent in 2016, according to the 2018 ANREV Management Fees and Terms Study, which shows the increasing commitment of the industry to transparency.

The latest study continues to show major differences between fund styles’ TER, enabling a greater understanding of the fees associated with investing in different strategies. For example, core funds show the lowest TER at 0.58 percent based on GAV, value-added funds have the highest TERs at 1.81 percent on average and opportunistic funds sit in the middle with an average of 0.91 percent.

Looking at the TERs by year of first closing, which is used as a proxy for vehicle vintage, the TERs of older funds — those with a year of first close prior to 2007 — was 0.54 percent on a GAV basis, lower than the TERs of those funds that had a year of first close post-2014, which amounted to 1.64 percent on a GAV basis.

TERs are also impacted by the size of the funds, with sizeable changes in the average TER since the last study. Funds with more than $1 billion of GAV have a TER of 0.63 percent, compared with 1.67 percent for funds with less than $500 million of GAV.

Multi-country funds have a slightly higher TER than single-country funds, and within single-country funds, Australia funds have the lowest TER at 0.50 percent, lower than the core funds average.

“As the only such study in the industry in Asia Pacific, ANREV Management Fees and Terms Study is a crucial source of information for investors about non-listed real estate fund fees, serving as a very well-regarded reference point for ANREV’s members,” said Amélie Delaunay, director of research & professional standards, ANREV. “We believe this detail of data will help investors appreciate the differing levels of resources required for each strategy and therefore ultimately lead to an increase in investment in unlisted real estate amongst institutional investors as their comfort level increases.”

Andrew Read, head of Asia for Langham Hall, a member of ANREV, commented, “It’s good to see negotiations between fund managers and investors supported with this reliable base of facts, demonstrating the role and value of rigorous financial reporting in the industry.”

Around 100 funds participated in the study with 49 providing data on their TER.