“Everyone understands what core real estate is,” says Maarten van der Spek, a Dubai-based real estate adviser who previously worked for Abu Dhabi Investment Authority and Dutch pension manager PGGM.
“It’s a relatively simple buy-and-hold strategy with not a lot of active asset management. At the other extreme you have opportunistic funds, with annual return targets of, say, 18 percent doing distressed, complex deals, including highly leveraged plays.
“Everything in between, where the manager is taking on more risk than core, is called value-added. No clear definition and the lack of good research on performance is one of the problems,” he says.
The case for investing in value-added funds is, therefore, not immediately obvious. INREV’s quarterly fund index data show core funds generally outperform by 50 basis points to 230 basis points, in terms of annualised rolling total returns. Quarterly internal rates of return (IRR) data for closed-end, value-
