THE global funds of funds industry has posted a record increase of US$53.2 billion of assets under management at the end of 2020.
According to the Funds of Funds Study 2021, by INREV and ANREV and the Fund Manager Survey 2021 by ANREV, INREV and NCREIF, demand remains high for large core style funds of funds with global strategies, as the industry records is third year consecutive year of growth.
Both studies found that investors were drawn to funds of funds that offer scale, sector and geographic diversification over a range of non-listed estate investment strategies.
The data in both studies found a trend of investor consolidation and an increased emphasis on strategic reviews, driving demand for funds of funds with global strategies.
“Funds of funds continue to play a role in the different routes to access real estate markets all around the world,” said Amélie Delaunay, director of research and professional standards at ANREV.
Such funds of funds, with global strategies, made up 70% of the total number and 95% of the total NAV, of the INREV/ANREV Funds of Funds Universe.
“We see an increase in the domination of global core funds in terms of strategies suggesting that global diversification appeals more to investors than just a regional one,” said Delauney.
Those with a European investment strategy followed, making up 22% of the universe by total number and 4% of total NAV, with those targeting an Asia Pacific strategy representing 9% by number and 1% of total NAV.
Core style funds of funds make up 48% of the universe by number and 94% of total NAV, with core style funds of funds typically larger, with an average NAV of US$2.2 billion.
Though the three largest core style funds of funds make up 78% of the total value of the universe, with an average NAV of approximately US$6.7 billion.
Meanwhile, value added funds of funds make up just 5% of total NAV, with an average NAV of US $137 million, with funds of funds with an opportunity investment style making up just 1%, with an average NAV of US$109 million.
Vehicles launched between 2001 and 2007, typically do not perform as strongly, this was still the case over 2020. With older vintage vehicles seeing a total return of -5.1%.
However, vehicles with vintages between 2015 and 2020 experienced the sharpest decline, delivering a total return of 0.3% compared to 8.9% in 2019.
Funds with vintages between 2008 and 2014, also did not perform as well, posting total returns of 1.7%, down from 2019’s 6.6%.