Speakers: Charles Haase, Chief Executive, ANREV. Dan Dierking, President, NCREIF
How does the Global IRR Index benefit investors operating on a global scale?
Lonneke Löwik: Just like the Global ODCE Index and Global Real Estate Fund Index, the Global IRR Index caters to the needs of global investors who are clearly seeking more globally comparable data as their own activities grow across regions. The money weighted internal rate of returns is the single most important metrics for those investing in closed-end real estate vehicles, particularly funds with a value added or opportunistic strategy. As such there is a clear need for having a Global IRR index for open-end real estate vehicles. The time weighted return calculations are more relevant like within the recently launched Global ODCE Index. This product from the Global Alliance is a further evidence how the three organisations, INREV, ANREV and NCREIF play a pivotal role in further strengthening the non-listed real estate industry with a wide range of indices, standards and research.
What is the key use of the Global IRR?
Dan Dierking: The Global IRR Index measures the since inception internal rate of return performance of closed-end non listed real estate funds with non core member defined strategy value add and opportunistic on a quarterly basis. Performance is measured net of fees and other costs and represents the aggregate investor return. The major benefit is being able to compare the outcome of investing in funds in the three regions that raise capital in different years in terms of their money weighted return on exit. The index report not only shows averages of the individual vehicles IRR but also the median and quartile values to give an idea of the range of returns for each vintage. This gives a real real world view of fund performance through different stages of the real estate cycle.
How will the Global IRR contribute to the overall transparency and standardisation of the non-listed real estate market?
Charles Haase: The Global IRR Index compares the IRRs of value add and opportunistic funds of different vintages rather than being a conventional time series based on a sample through time, as is the case with most other indices. It allows access for all members of our three organisations to the global data and other regional IRR indices that they would not otherwise have access to. This index is an important move forward from the capital and performance measurement perspectives. As global investing has advanced across the full risk spectrum of real estate investments. The next step is all about creating more transparency with a higher coverage of the index which allows for more granular insights. Therefore, continuous encouragement of all managers across the three regions to provide data is essential.
