Quarterly NFI-ODCE total return gross of fees edged lower in the second quarter 2018, to 2.05 percent, from 2.20 percent in the first quarter, and was well above the 1.70 percent return in the second quarter 2018, according to the National Council of Real Estate Investment Fiduciaries’ (NCREIF) newly released second quarter 2018 results for the NCREIF Fund Index – Open‐end Diversified Core Equity (NFI-ODCE). The NFI-ODCE consists of 25 funds, totaling $241.2 billion of gross real estate assets and $201.2 billion of net real estate assets.
The income return for the quarter was 1.05 percent, up slightly by .01 percent from the previous quarter. Appreciation slowed to 1 percent for the quarter, below the previous quarter’s 1.16 percent, though up .38 percent from the second quarter 2017.
For the trailing four quarters, the NFI-ODCE total return gross of fees was 8.44 percent, up from 7.87 percent for the year ended second quarter 2017 and below the annualized since inception return of 8.72 percent. The annual total return was comprised of a 4.29 percent income return and 4.01 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 remains below the 21.8 percent average since 2000 and was 21.1 percent for both the first and second quarters.
Quarterly NFI-ODCE investor net cash flows were positive $721 million, a significant increase from last quarter’s $74 million and surpassing quarter 2017’s $693 million. For the trailing year, contributions were $15.9 billion and distributions/redemptions were $16.2 billion for an annual negative net cash flow of $300 million.
The NFI‐ODCE Index is a capitalization‐weighted, gross of fees, time‐weighted return index.
