Publications

- December 1, 2015: Vol. 27, Number 11

To read this full article you need to be subscribed to Institutional Real Estate Americas

One way not to align interests

by Roy Schneiderman

I was chatting recently with a client about one of many alignment issues that haunt institutional real estate investors: How can you make sense of an arrangement where investors are evaluated on the basis of time-weighted returns, while incentive fees paid to managers are structured on an IRR basis?

It would seem the industry could take one of two fundamental approaches to resolve this conundrum: Either start evaluating investor performance using IRRs (or some other money-weighted metric), or create an incentive-fee scheme that rewards managers on a time-weighted basis.

Changing the way institutional real estate investors are evaluated would require changing the way chief investment officers, boards and industry organizations think. This likely would take a concerted effort by many industry participants over a considerable period of time. But any institutional real estate investor could start experimenting with alternative incentive-fee structures. It would only requir

Glossary, videos, podcasts, research in the Resource Center

Forgot your username or password?

Close your account?

Your account will be closed and all data will be permanently deleted and cannot be recovered. Are you sure?

We respect your privacy! Please give consent for processing data as described in our Privacy Policy