In the next three years (2019-2021), 50 funds are scheduled to terminate, which could potentially bring €13.2 billion NAV of assets onto the market. More than 45% of these funds are expected to terminate in 2020, representing 40.9% of the total NAV.
During the remainder of 2019, 11 funds with a total NAV of €2.2 billion are due to terminate. On average, these funds have an NAV of €295 million, lower than those terminating in 2020 and 2021, which average €341 million NAV and €578 million respectively.
Most terminations are expected take place in 2020, a total of 23 vehicles. Ten of these twenty-three vehicles are core in style, nine are value added and four are opportunity.
The largest proportion of this group are core funds, with 46.4% of the total NAV, while value added and opportunity funds account for 41.2% and 12.4% of value, respectively. This distribution is similar to that seen in last year’s results.
A five-year analysis produces a similar pattern of results. Funds with termination dates in 2021 delivered a return of 9.3% on average, while those terminating in 2019 and 2020 generated average returns of 6.5% and 7.6%, respectively.
Performance has tended to converge in the last two years, with all three groups posting positive returns.
The performance of this group of funds was further analysed by splitting them into four different categories depending on their vintage year (year of first closing). Those of a vintage between 2011 and 2013 showed the most robust performance among the four groups, delivering an average four-year total return of 10.1%, while those with a vintage before 2008 delivered 5.5%, those dating from between 2008 and 2010 returned 1.7%, and those with a first closing after 2013 delivered 7.3%.
Looking at the average IRR by liquidation year, those funds with termination dates in 2020 had the highest IRR, 11.4%, followed by those terminating in 2019 and 2021. These funds posted IRRs of 9.4% and 7.4%, respectively.
Most of the funds with a single country strategy terminating between 2019 and 2021 (50% of the total), are focused on the UK. The timing coincides with, but isn’t necessarily driven by, Brexit. Over the same period, single sector-focused funds could bring €9.7 billion of assets back onto the market. Almost 41% of these vehicles are retail funds, collectively accounting for €4.4 billion.
Core funds dominate terminations between 2019 and 2021, representing 44.0% of the total for this period, while 42.0% are value added and 14.0% are opportunity.
Of the funds expected to terminate in the next three years, around half have vintages dating back to between 2010 and 2013 and 25% pre-date 2008. This indicates that most were launched at the beginning of the recovery from the financial crisis and very few during the crisis.
The INREV universe consists of 458 vehicles, of which 243 are closed end, the latter representing NAV of €47.3 billion.