Non-listed real estate total expense ratios diverse across Europe and Asia

According to the INREV / ANREV Management Fees and Terms Comparison Study 2019, the average TER for non-listed real estate funds in Asia Pacific is 1.04% on a gross asset value basis (GAV) before performance fees, compared to 0.86% in Europe. The disparity also exists when TER is calculated on a net asset value (NAV) basis. 

The study identifies size as an important determining factor for TER. While larger vehicles (over €1 billion in value) have similar TERs on a GAV basis in both regions; medium sized funds (€500 million to €1 billion) reached 0.71% in Europe and 0.90% in Asia Pacific; small funds (less than €500 million) had the highest average TER by comparison and the biggest disparity between the two regions, at 1.07% in Europe and 1.67% in Asia Pacific.

Vehicle vintage is also significant. Younger vehicles tend to have higher TERs than older vintages. Funds launched in Europe and Asia Pacific before 2007 have an average TER of 0.77% and 0.54% based on GAV, versus those launched in the last five years which recorded average TERs of 1.34% and 1.64%, respectively. 

With respect to single sector performance, all traditional sector funds in Asia Pacific have smaller TERs than in Europe on both a GAV and NAV basis, before and after performance fees. For example, TERs based on GAV for industrial and logistics are 0.53% in Asia Pacific versus 0.84% in Europe – ahead of retail funds in both regions.

Despite differences elsewhere, funds split by structure are fairly similar across both Asia Pacific and Europe – with the average TER for open end funds on a GAV basis at 0.70% and 0.66% in Asia Pacific and Europe respectively. But there are more noticeable differences when looking at TERs for closed end funds. TERs before performance fees are higher for Asia Pacific, at 1.30% on a GAV basis compared with 1.18% for Europe.

Lonneke Löwik, INREV CEO, explains:

“These results are more pertinent than ever, given the increasing need for clarity on fees and costs. This detailed breakdown of TERs across Europe and Asia Pacific provides useful insight into the differences and similarities across regions and markets that will help inform investment decisions. It also reflects the efforts of INREV and the industry as a whole to exert downward pressure on fees; and adds to the consistent drive for greater transparency.”

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