The purpose of this Performance Measurement Module as part of the INREV Guidelines is to provide support to managers when computing and reporting historic performance measures of a vehicle. This module includes detailed computation formulae as well as examples to facilitate implementation. These guidelines have primarily been designed for direct property vehicles.
The guidelines aim to increase consistency in the reporting of performance to investors. The standardisation will also improve the relevance of indices, such as the INREV Index, which are potentially used as points of reference. Comparing the performance of a vehicle can add additional insight into a vehicle’s performance. The point of reference should contain vehicles with similar investment mandates, objectives or strategies.
The guidelines have been developed as a consequence of increased demand for standardised performance measures for non-listed real estate vehicles. Global Investment Performance Standards (“GIPS”) issued by the CFA Institute and the NCREIF PREA Reporting Standards have been considered when writing these recommendations. The level of effort for those managers that are in compliance with these standards should be limited to claim compliance with this module. Although the frameworks are different, the intention is to align the approaches and avoid conflicts in the methodologies. The Performance Measurement Module has also been developed in light of existing practice in the European non-listed real estate fund industry.
Performance measures and the level of disclosures may vary depending on the style of the vehicle (as determined in the INREV Fund Style Classification methodology). The level of discretion of a fund manager in determining the cash flows of a vehicle and investment restrictions vary significantly depending on the vehicle type. Some performance measures may not be appropriate for some vehicles. For instance, fund managers of closed ended vehicles have discretion over capital calls and distributions, while fund managers of open ended vehicles need to accommodate new issues and redemptions which may interfere with the portfolio strategy. In this context, money weighted returns are more relevant for closed ended vehicles whereas time weighted returns are more relevant for open ended vehicles.
Performance measurement guidelines include the minimum requirements to claim compliance with INREV guidelines. Managers are free to compute and disclose additional measures where they see fit.