The National Council of Real Estate Investment Fiduciaries (NCREIF) has released third quarter 2017 results for the NCREIF Fund Index – Open‐end Diversified Core Equity (NFI-ODCE).
The NFI-ODCE consists of 23 funds, totaling $220.9 billion of gross real estate assets and $181.4 billion of net real estate assets. Quarterly total NFI-ODCE returns gross of fees edged higher in the third quarter 2017, to 1.87 percent, from 1.70 percent in the second quarter, but was down compared to 2.07 percent in the third quarter 2016. The income return has been essentially flat over the past year and was 1.07 percent in the third quarter 2017. Quarterly appreciation has averaged 0.70 percent in 2017 with 0.79 percent appreciation in the third quarter, down from the 1.02 percent quarterly average in 2016 and 2.38 percent in 2015. The appreciation return consists of real estate and debt valuation and the debt valuation component was 0.33 percent in the third quarter, up from 0.30 percent last quarter and negative 0.14 percent a year ago.
For the trailing year, the annual NFI-ODCE total return gross of fees was 7.66 percent, down from 10.08 percent for the year ending third quarter 2016 and below the annualized since inception return of 8.72 percent. The annual total return was comprised of a 4.36 percent income return and 3.19 percent appreciation. NFI-ODCE returns measure fund-level performance and therefore can reflect other investments beyond properties, including cash balances and leverage. Leverage is conservative among these funds given their core strategies, ranging from 15 percent to 34 percent over the quarterly series history beginning in 2000. NFI-ODCE leverage continued to edge down in the third quarter 2017, to 21.3 percent, from 21.5 percent last quarter and 22.1 percent a year ago.
Quarterly net NFI-ODCE fund flows have been negative for three of the past four quarters. After turning positive in the second quarter 2017, net flows were negative $1.6 million in the third quarter for the narrowest gap between quarterly contributions and distributions/redemptions in the series history, with both at roughly $4.1 billion each. For the trailing year, annual contributions were $14.6 billion with distributions/redemptions of $15.8 billion for negative net flows of $1.3 billion.
Find the full press release and snapshot report here.
