Luxembourg Real Estate Funds

alfi survey
Luxembourg real estate investment funds
November 2014
Executive summary4
Introduction6
1. CSSF Data on Real Estate Investment Funds in Luxembourg
6
2. Survey Coverage7
3. Luxembourg Real Estate Funds - the Framework
7
3.1 Direct REIFs vs Funds of REIFs
7
3.2 Regulatory Framework: Regulated vs Unregulated Structures
7
3.3 Legal Structures8
4. Scope and Methodology9
4.1 Scope9
4.2 Methodology9
Part I - Direct Real Estate Funds & Real Estate SICARs
10
1. Introduction 10
2. Initiator Origins11
3. Legal Structure and Regime
11
4. Fund Structure13
5. Investment Style14
6. Liquidity 15
7. Term 16
8. Geographical focus of fund investments
17
9. Target Sectors18
10. Net Asset Value (NAV) distribution
19
11. Gross Asset Value (GAV) distribution
20
12. Target Gearing of Funds 21
13. Fees21
14. Number of Investors23
15. Type of Investors23
16. Investor Origins24
17. Accounting Standards25
18. Frequency of NAV Calculation27
19. Valuation Standards 29
20. Stock Exchange Listing29
21. Currency 29
Part II - Funds of Real Estate Investment Funds
30
1. Introduction 30
2. Initiator Origins31
3. Legal Structure and Regime
32
4. Investment Style32
5. Liquidity33
6. Term34
7. Geographical focus of fund investments
35
8. Target Sectors36
9. Net Asset Value (NAV)37
10. 2015 Target NAV distribution37
11. Fees38
12. Type of Investors39
13. Accounting Standards40
14. Currency40
15. Frequency of NAV Calculation41
16. Stock Exchange Listing41
Appendix42
Service Providers42
Glossary45
Acknowledgements47
3
executive summary
The Association of the Luxembourg Fund Industry (ALFI) has published the 2014 Real Estate
Investment Funds (REIF) survey, its ninth edition.
The survey illustrates the evolution of the REIF
market for direct real estate funds (Direct Funds)
and Real Estate SICARs, but also for Funds of
REIFs, as at 30 June of 2014.
2013 was another good year for Luxembourg
Highlights
Trends in direct REIFs
About 44% of the surveyed funds have been set
up as a “Fonds Commun de Placement” (FCP)
and this usually in combination with the SIF
regime. The trend toward the FCP form has reversed compared to earlier findings since SICAVs
now account for the same proportion, and all new
launches of Direct Funds continue to be Specialised Investment Funds. In all, 83% of the total
Direct Funds fall within the SIF regime.
In 2013 all new Direct Fund launches were
triggered by initiators in Europe with Benelux,
German and Swiss groups being the most active.
Investment strategies
The most common target sector is still ‘multi-sector’ (57%) with a preference for ‘office’ at 27%
and for ‘residential’ at 21% in 2013. Early signs
for 2014 is a preference for the ‘retail’ sector at
30% of the early launches in 2014.
4
domiciled REIFs as the population continued to
expand by 15 Direct Funds, (slightly down from
25 in 2012), but Q1 and Q2 of 2014 have brought
increased activity, with 15 funds launched in the
six month period, bringing the total of Direct
Funds surveyed to 237 vehicles (including 17 Real
Estate SICARs), an increase of 10% since the last
ALFI REIF Survey and 276% since 2006, a compound annual growth rate (CAGR) of 21%.
66% of the Direct Funds have a single compartment structure. This is true for 71% of the Core
funds, which represent both 47% of the 2013 fund
launches and 47% of the total Direct Fund population. Opportunity (84%) and Core funds (65%) are
mostly closed-ended, with a third of Core funds
offering some form of liquidity to investors. In total 70% of funds are closed-ended, reflecting the
inherent illiquidity of real estate as an asset class
and the difficulties of achieving investor liquidity
on demand.
The trend towards simplification of funds has
continued.
SIFs account for all of the Real Estate Funds
launched in the last 30 months and is now firmly
established as the favored regime for regulated
Real Estate Funds in Luxembourg.
Fund sizes and gearing
A single country investment focus represents 41%
of the geographic investment strategies (up from
35% and 27% in the preceding two years), which
supports the trend toward simplification but also
underlines the suitability of Luxembourg investment vehicles for multi-national investment. 79%
of the surveyed Direct Funds invest in Europe,
whereas 8 funds invest in the Americas only and
11 in the Asia/Pacific region only.
Similar to the findings of the 2012 and 2013
ALFI Surveys, average fund sizes continue to
decrease, with the most common NAV range
dropping below EUR 100 million for the first
time (also impacted by new launches). Funds
have become smaller, which aligns with the more
cautious capital raising forecasts of 2014 and
preceding years. While target gearing is down in
most of the ranges, the results are mixed, indicating some optimism in relation to the ability to
borrow.
Fund structures
Fees
Though umbrella funds remain popular due to
various practical and cost considerations, the
trend over the last few years has been towards
simplification of structures and strategies; hence
As in the previous surveys, the most commonly
used basis for management fee calculation is
GAV. 53% of these funds are charging between
0.51%-1.5%.
Investors
Investors are mainly European but a significant
portion comes from the Americas, Asia and the
Middle East, which confirms the global appeal of
the SIF regime.
Luxembourg domiciled Direct Funds and Funds of
REIFs are used mainly for small groups of institutional investors, with 84% having less than 25
investors.
Only 2% reported having more than 100 investors.
The Direct Funds are widely distributed (but with
focus on specific geographical areas), with only
27% limited to a single country, and 24% being
sold in more than six countries, confirming the
attractiveness of Luxembourg REIFs to a global
investor base.
Fund reporting
Funds reporting under IFRS have seemingly
stabilized at 42% of the total, while the larger
proportion (77%) of funds launched during 2013
and reporting under Lux GAAP is less prevalent
(at 50%) in the early launches of 2014. Reporting
preference is impacted by the investment strategy: Core funds (57% Lux-GAAP), Opportunity
funds (72% Lux-GAAP), Value-Added funds (50%
Lux GAAP).
53% of the funds reporting under IFRS make
adjustments, whereas only 39% do so under
Lux-GAAP. Funds of REIFs generally (79%) report
under Lux-GAAP, a trend that has gained significant momentum over the past four years.
50% of the Direct Funds report a quarterly NAV,
similar across all funds regardless of investment
focus. Since 70% of Direct Funds are closed-ended, the reporting of a monthly NAV (13%) is
mainly due to investors’ demand for performance
measurement rather than unit redemption.
57% of the Direct Funds have an annual valuation
with 8% requiring monthly valuations, a significant increase over recent years. Almost all of the
funds use an independent appraiser, with RICS
(68%) being the preferred standard.
This latest edition of the ALFI REIF survey confirms that Luxembourg remains the favored location to
establish and maintain multi-national and multi-sectoral regulated real estate investment funds which
continue to appeal to institutional investors and fund managers around the world.
5
introduction
The ALFI REIF subcommittee has conducted the
Luxembourg regulated Real Estate Investment
Funds (REIFs) annual Survey for the ninth consecutive year. The ALFI Survey took place during
the third quarter of 2014, and represents the
market composition as at 30 June 2014.
gain an understanding of market trends rather
than claiming to provide complete and comprehensive data, though a significant proportion of
the Luxembourg REIF market has been captured.
The data sources are the depositaries that
support the Direct Funds and Funds of REIFs in
Luxembourg, a population that has changed and
grown consistently year to year.
The main objective in producing this Survey is to
1. CSSF data on
Real Estate
Investment Funds
in Luxembourg
Number of Luxembourg real estate fund units (*)
Fund units
350
300
250
200
150
218
183
50
5
11
0
5
7
3
7
6
7
45
29
12
14
8
83
21
19
121
135
16
15
268
277
279
27
27
23
23
Q1
Q2
Q3
166
26
27
13
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: ALFI/CSSF
100
252
2014
Part II
Institutional Funds / SIF
(*) Number of single funds plus number of sub-funds of umbrella structures
Net assets under management in Luxembourg real estate funds
EUR million
35.000
30.000
1.732
1.761
1.162
1.162
2006
2007
2008
2009
2010
2011
2012
2013
Q1
Q2
Q3
2014
Part II
6
Institutional Funds / SIF
Source: ALFI/CSSF
1.843
29.646
3.139
28.501
3.846
28.743
24.082
4.126
20.925
6.180
2004
17.580
7.315
1.557
850
2005
2.280
522
2003
4.705 3.307
2002
2.343
369
1.927
146
2001
3.730
2000
469
0
280
5.000
3.235
10.000
14.839
8.131
15.000
14.746
20.000
31.403
25.000
2. Survey
Coverage
As shown below, the ALFI REIF Survey provides
good coverage of the market compared to the
CSSF data. CSSF data shows that 300 Direct
REIFs and Fund of REIFs were in existence as at
June 2014, while this survey collects data as at
June 2014 on 220 Direct Funds and 40 Fund of
REIFs, for a total of 260 funds (87% coverage). In
addition, data related to 17 SICARs are included
in this Survey.
Number of fund units surveyed compared with total fund units as per CSSF
Fund units
350
300
250
200
Source: ALFI/EY/CSSF
150
100
50
0
Luxembourg
REIFs - the
Framework
2005
2006
2007
2008
2009
2010
2011
2012 /
Jun 2013
2013 /
Jun 2014
SICARs
Fund of REIFs (excluding SICARs)
Direct REIFs (excluding SICARs)
CSSF REIFs & Fund of REIFs (excluding SICARs)
3.1 Direct REIFs vs. Funds of REIFs
For purposes of this Survey, Real Estate Funds
are characterised as either “Direct Funds” or
“Funds of REIFs”:
• Direct Funds include both regulated fund
vehicles and SICARs which invest in real
estate assets either directly or via intermediary entities (special purpose vehicles, or
SPVs).
• Funds of REIFs typically invest in other
Real Estate Funds or SICARs, although
other assets may be held.
• Indirect Real Estate Funds invest in listed
real estate related securities as portfolio
investments; such funds are outside the
scope of this Survey.
3.2 Regulatory Framework: Regulated vs.
unregulated Structures
Regulated structures, for the purposes of this
Survey, are those fund vehicles that are autho-
rised and supervised by the Commission de Surveillance du Secteur Financier (the CSSF). The
laws and regulations applicable to Luxembourg
regulated funds are comprised of laws, circulars
issued by the CSSF, and also certain Grand-Ducal
regulations.
The primary law applicable to regulated funds is
the law of 17 December 2010 relating to undertakings for collective investment (UCIs), as
amended (the 2010 law). Of special relevance to
Real Estate Funds, the 2010 law is complemented
by the law of 13 February 2007 on Specialised
Investment Funds, as amended (the SIF law).
Interests in funds which are subject to the 2010
law can in principle be sold to any type of investor, i.e. institutional, high net worth and retail
investors. 2010 law “Part I” funds (UCITS) may
take advantage of the European passport, which
means that they can be sold to any type of investor in any EU Member State after complying with
certain formalities. They are, however, required
to comply with detailed investment restrictions.
2010 law “Part II” funds must comply with each
7
relevant member state’s local distribution rules,
and are required to comply with certain investment restrictions (much less stringent than for
“Part I” funds).
Interests in funds which are subject to the SIF law
may only be sold to “well-informed investors”. In
addition to the usual market of institutional and
professional investors, this opens SIFs to high
net worth individuals who meet the requirements
of the SIF law. SIFs are not subject to general
investment restrictions but must ensure adequate
risk diversification and disclosure; exceptions are
subject to review by the CSSF on a case-by-case
basis.
Another useful Luxembourg vehicle is the SICAR,
which is not classified as a fund. The “Société
d’Investissement en Capital à Risque” is governed by the law of 15 June 2004, as amended.
It is an investment vehicle tailored to qualified
investors investing in venture capital and private
equity. The SICAR can take various legal forms
(such as the S.C.S., S.A., S.à r.l., S.C.A. or other
legal structures) and, while regulated, is not subject to diversification requirements.
Unregulated vehicles are typically set up as companies under the law of 10 August 1915 on commercial companies, as amended. They often take
the form of private limited companies (S.à r.l.) or
partnerships limited by shares (S.C.A.). When
companies have as their main purpose the holding
and financing of participations in other companies
(which in their turn may own real estate) such
companies are often referred to as “SOPARFI’s”.
SOPARFIs do not enjoy a special legal or tax regime, but like any other fully taxable Luxembourg
companies, they benefit from the participation exemption regime on qualifying participations. While
unregulated vehicles operate in a manner similar
to regulated funds, unregulated vehicles offer
greater flexibility, for example in terms of choice
of service providers, and lower set-up and operating costs (as opposed to investment vehicles
subject to regulatory oversight and restrictions).
Regulated vehicles benefit, among others, from
favorable tax status and a high level of investor
protection. Unregulated vehicles tend to have
a small group of investors and a simple capital
structure. Notwithstanding the foregoing, unregulated vehicles may have a higher total Net Asset
Value than regulated funds with more investors.
8
This survey is limited to Direct Funds and Funds
of REIFs which are regulated by the “product”
laws in Luxembourg. It does not take into account
real estate investment structures which are not
regulated by the “product” laws but which may,
nevertheless, be “Alternative Investment Funds”
as defined by the Directive 2011/61/EU on alternative investment fund managers (AIFMD).
3.3 Legal Structures
Real Estate Funds governed by the 2010 law or
the SIF law may be set up either in corporate
form (“SICAV” or “SICAF”), in contractual form
(“FCP”) or as partnerships (“SCS” or “SCSp”).
A key determining factor in the selection of one
of these structures is the tax regime applicable to
investors; FCPs and partnerships are tax transparent whereas SICAVs and SICAFs are taxable,
with certain exceptions.
Regulated funds governed by the 2010 law or the
SIF law as well as the SICAR law may adopt an
umbrella structure with multiple sub-funds where,
for instance, sub-funds have a different investment policy or are restricted to certain types of
investors. The umbrella fund is legally treated as
a single entity; however, in principle, each subfund is responsible for its own assets and liabilities.
For the purpose of this Survey, reference to the
number of fund “units” means the number of
single funds plus the number of active sub-funds
in umbrella structures.
4. Scope and
Methodology
4.1 Scope
The ALFI Survey covers Direct Funds, Real Estate SICARs and Funds of REIFs to which ALFI
members provide depositary services. It does
not cover unregulated vehicles or AIFs which are
not regulated under “product” laws in Luxembourg, nor does it cover the intermediary financing vehicles set up for the acquisition of property or similar collective investment vehicles.
4.2 Methodology
The ALFI Survey is based on a comprehensive questionnaire which was sent to all ALFI
members. The depositaries and administrators
responding are those which service the vast
majority of Direct Funds and Funds of REIFs in
Luxembourg. The questionnaire, which focused
on the status as at June 2014, included questions relating to each fund’s:
• Geographical investment region
• Target segment of investment
• Net Asset Value (NAV), Gross Asset
Value (GAV) and target gearing
• Investment style
• Legal regime and structure
• Investor types and origin
• Accounting standard (GAAP)
• Fees
• Distribution method
• Valuation methodology
• Initiator origin
• Service providers including depositary,
central administration, audit, legal and tax
Where possible, Survey results are at times
compared with those published in Luxembourg
Real Estate Funds: A comprehensive survey by
Ernst & Young, published in January 2006 and
the ALFI REIF Surveys 2007 to 2013.
9
part I - direct real estate funds & real estate SICARs
1. Introduction
The Direct Funds population surveyed (excluding
SICARs) continued to expand with 15 new Direct
Funds launched in 2013 and a further 15 by the
end of June 2014, bringing the total to 220 Direct
Funds as at 30 June 2014. No Sicar launches
were reported in 2013.
The total number of Direct Funds covered by this
survey increased by 10% since last year and by
276% since 2006, a compound annual growth rate
(CAGR) of 21%. We also include data on 17 Real
Estate SICARs.
Number of fund units launched per year (*)
Fund units
40
35
2
30
3
3
3
25
19
20
2
10
1
28
10
6
4
< 2000
1
1
2003
2004
25
3
8
5
0
26
24
15
15
2010
2011
15
15
2013
June
2014
5
2005
Part II
1
1
2006
2007
1
2008
2009
Institutional Funds / SIF
2012
SICAR
(*) This graph shows the launch year of fund units that are included in the REIF Survey 2014. It is not a cumulative sequence.
Institutional / SIF funds constitute the majority of
Real Estate Funds and since 2006 have accounted for almost all new fund launches. This was
reinforced over the last 30 months, with all the
new launches of Direct Funds during this period
being SIFs, bringing the total of SIFs to 83% of
the Direct Fund population.
Proportion of fund types launched per year (*)
100%
90%
80%
71%
86%
100%
86%
87%
100%
40%
90%
94%
100%
100%
100%
2012
2013
June
2014
5%
14%
30%
20%
10%
0%
14%
< 2000
2003
2004
2005
SIF
42%
22%
33%
10%
10%
4%
3%
2006
2007
SICAR
10%
7%
6%
2008
2009
2010
2011
Source: ALFI Survey 2014
60%
50%
53%
53%
70%
2010 Part II
(*) This graph shows the launch year of fund units that are included in the REIF Survey 2014. It is not a cumulative sequence.
10
Source: ALFI Survey 2014
15
2. Initiator origins
Over the years, initiators in Europe were responsible for most of the new REIF launches, with
UK, German and other European initiators being
the most active, followed by initiators from the
United States.
Proportion of REIFs launched by initiators’ origin (*)
90%
25%
26%
13%
21%
50%
57%
70%
7%
13%
24%
14%
12%
100%
3%
3%
46%
7%
20%
44%
24%
8%
42%
4%
4%
4%
43%
20%
25%
24%
2003
2004
2005
14%
8%
2006
2007
19%
28%
27%
27%
2012
2013
June
2014
19%
6%
3%
2008
27%
20%
5%
18%
6%
7%
4%
7%
11%
13%
13%
10%
7%
7%
7%
8%
3%
33%
7%
8%
5%
10%
30%
13%
6%
13%
3%
13%
25%
13%
13%
7%
7%
< 2000
14%
13%
6%
12%
4%
8%
7%
7%
50%
0%
19%
14%
7%
60%
10%
4%
10%
80%
40%
3%
7%
Source: ALFI Survey 2014
100%
2%
2009
2010
2011
Australia/NZ
Benelux
Canada
France
Germany
Italy
Middle East
Nordic/Baltic
Other Americas
Other Europe
Russia
Spain
Switzerland
UK
US
(*) This graph shows the launch year of fund units that are included in the REIF Survey 2014. It is not a cumulative sequence.
The majority of Real Estate Funds fall under the
SIF law (83%) and all new Real Estate Funds
launched over the last 30 months have adopted
the SIF regime. This reflects the popularity of this
regime for Real Estate Fund initiators seeking an
onshore regulated investment fund vehicle for
all types of alternative investment fund products
(including Direct Funds and Funds of REIFs).
Legal regime and vehicle type combined by launch year (*)
100%
3%
7%
14%
90%
23%
80%
60%
10%
46%
75%
50%
25%
7%
7%
25%
43%
< 2000
2003
2004
33%
7%
4%
4%
2005
2006
2007
7%
2008
3%
SICAR (SCA)
SICAR (Sàrl)
45%
4%
3%
4%
3%
SIF (SICAF)
SIF (FCP)
56%
5%
50%
42%
21%
7%
SIF (SICAV - SCA)
11%
29%
53%
26%
14%
SIF (SICAV - SA)
14%
11%
20%
20%
60%
100%
43%
SIF (SICAV - Sàrl)
20%
6%
30%
0%
29%
19%
3%
3%
40%
10%
26%
14%
36%
43%
70%
13%
8%
47%
SICAR (SA)
40%
16%
7%
6%
2009
2010
2011
2012
2010 Part II (SICAF)
2010 Part II (FCP)
2013
June
2014
(*) This graph shows the launch year of fund units that are included in the REIF Survey 2014. It is not a cumulative sequence.
11
Source: ALFI Survey 2014
3. Legal structure
and regime
104 of the 220 Direct Funds (excluding SICARs)
use the FCP as the vehicle, usually in combination
with the SIF regime.
The FCP-SIF and SICAV-SIF are by far the most
popular combinations of regulatory regime and
fund vehicle, and are roughly equally represented
in a combined 87% of all Direct Funds.
The fact that each of the SCA-SICAV and SA-SICAV combinations have over the last three years
increased their prorata representation in respect
of both new launches and the total reflects the
versatility of the Luxembourg environment in
offering both transparent and opaque vehicles,
and in supporting regulatory regimes suitable to
initiators’ and investors’ requirements.
Legal regime and structure combined
SIF SICAV - SA: 21%
SIF SICAV - SCA: 21%
SIF SICAV - S.à r.l.: 1%
SIF SICAF: 3%
SICAR - SA: 1%
SICAR - SCA: 5%
SICAR - S. à r.l.: 1%
Part II SICAF: 3%
SIF FCP: 37%
Part II FCP: 7%
Source: ALFI Survey 2014
Data as at 30 June 2014
Legal regime
SICAR: 7%
Basic structure
SICAF: 6%
Part II: 10%
SICAR: 7%
FCP: 44%
SIF: 83%
SICAV: 43%
Source: ALFI Survey 2014
Data as at 30 June 2014
12
CSSF Data as at
30 September 2014
Legal regime and basic structure combined
SIF / SICAV: 51%
SIF / SICAF: 4%
Source: ALFI / CSSF
Data as at 30 September 2014
excludes SICARs
Part II / SICAF: 1%
SIF / FCP: 37%
Part II / FCP: 6,5%
Part II / SICAV: 0,5%
Legal regime
Basic structure
SICAV: 52%
Part II: 8%
SICAF: 5%
SIF: 92%
FCP: 43%
66% of the surveyed Direct Funds are single
compartment vehicles. The remaining funds have
a multi-compartment umbrella structure (i.e. subfunds) which confirms the increased popularity
of umbrella structures over recent years. 26%
use this structure solely for separate investment
strategies, 5% use an umbrella solely for co-investment and 4% combine both types of usage.
4% of the funds use feeder vehicles and 16%
have complex share classes so that, for exam-
Pooling
ple, different management and performance fee
structures can be managed for different investors.
There are only 5 funds which use a pooling structure, possibly because in practice this is difficult
to implement for Direct Funds investing in real
estate assets (as opposed, for example, to equity
funds). The trend over the last several years has
been towards simplification of structures and
strategies – if anything, that trend is gaining further momentum.
2%
98%
Feeder Vehicles 4%
Complex share classes
96%
16%
84%
Single compartment funds
66%
34%
Sub funds used for co-investment
4%
& separate investment strategies
Sub funds used for separate
investment strategies only
Sub funds used for co-investment
only
Yes
No
96%
26%
74%
5%
0%
95%
20%
40%
60%
80%
100%
13
Source: ALFI Survey 2014
4. Fund structure
5. Investment
style
51% of the 220 Direct Funds surveyed (excluding
SICARs) are “Core” funds with the remainder
split between “Value Added” (34%) and “Opportunity” (15%) fund styles. While these propor-
tions have remained relatively stable from 2009
to 2011, recent launches have focused on Core
strategies.
Value-Added: 31%
Opportunity: 22%
Core: 47%
Source: ALFI Survey 2014
Graph includes SICARs
In terms of regulatory regimes, all SICARs must
be Opportunity funds, Part II (2010 law) funds
predominantly pursue a Core strategy, while the
SIF regime is flexible (encompassing Core,
Value-Added and Opportunity strategies).
Almost half of new Direct Funds launched in 2013
and two thirds of those launched in the first part
of 2014 pursue a Core strategy, continuing the
drop in launches of Value-Added and Opportunistic funds over recent years. It will be interesting
to monitor developments, especially of Opportunistic funds, as more capital returns to the
market.
Fund units launched by strategy type (*)
100%
80%
70%
29%
50%
100%
39%
39%
28%
2003
2004
2005
27%
33%
67%
60%
< 2000
20%
28%
14%
25%
25%
28%
36%
31%
40%
20%
6%
14%
19%
43%
30%
0%
26%
43%
50%
10%
27%
19%
27%
60%
40%
18%
2006
Opportunity
33%
35%
2007
2008
50%
50%
2009
2010
Value-Added
2011
67%
44%
47%
2012
2013
Source: ALFI Survey 2014
13%
90%
June
2014
Core
(*) This graph shows the launch year of fund units that are included in the REIF Survey 2014. It is not a cumulative sequence.
14
70% of the surveyed funds are closed-ended, a
slight increase from the previous years’ findings.
5% of the funds are semi open-ended with 13%
being fully open-ended with no restrictions on
redemptions. 12% of the funds are open with
restrictions. This reflects the inherent illiquidity
of Real Estate as an asset class and thus the
difficulties of providing investors liquidity upon
demand. It also illustrates that investors are
allocating capital to funds that offer some sort of
liquidity.
Semi-Open
(Not continuous): 5%
Open - Restrictions: 12%
Closed: 70%
Open - No Restrictions: 13%
Source: ALFI Survey 2014
Value-added funds tend to be predominantly
closed-ended (65%), with 16% open-ended with
restrictions. Opportunity (84%) and Core funds
are mostly closed-ended (65%), but one third of
the core funds surveyed offer investors some
form of regular liquidity. These findings are substantially similar to those of the 2011, 2012 and
2013 ALFI Surveys.
Liquidity by fund investment style
100%
14%
90%
10%
2%
4%
14%
80%
15%
16%
70%
6%
5%
60%
50%
84%
40%
65%
30%
65%
20%
10%
0%
Core
Closed
Semi-Open (Not continuous)
Opportunity
Open - Restrictions
Source: ALFI Survey 2014
6. Liquidity
Value-Added
Open - No Restrictions
15
Term of direct real estate funds
7. Term
8 - 10 years: 25%
Infinite: 39%
11-15 years: 22%
Up to 7 years: 14%
Source: ALFI Survey 2014
One quarter of Direct Funds have a term of 8-10
years, while a further 39% have an infinite life.
26% of Opportunity funds have a life of 8-10
years, down from 42% and 33% (respectively) in
the 2012 and 2013 ALFI Surveys.
This shows a trend toward longer terms across all
strategies, with 36% of Opportunistic funds, 37%
of Value-Added funds and 43% of Core funds now
having an infinite term.
Fund duration by investment style
100%
6%
90%
18%
22%
80%
70%
43%
60%
37%
36%
50%
23%
30%
27%
26%
20%
10%
0%
28%
Core
11-15 years
16
16%
18%
Opportunity
Value-Added
8 - 10 years
Infinite
Up to 7 years
Source: ALFI Survey 2014
40%
country in the EU-28.
8 funds invest in the Americas only, 1 fund in the
Middle East and 11 funds in Asia / Pacific only.
Finally, 60 funds invest in 2 or more world regions,
reflecting the suitability of the SIF for investment
strategies focusing on a range of different countries.
In the 2014 ALFI Survey, 41% of Direct Funds
have a single-country investment focus which
shows a continued increase compared to the
2011, 2012 & 2013 ALFI Surveys (25%, 27% and
35% respectively). 63% of the funds invest only in
the EU-28. Among the 96 single-country funds,
76 funds (79%) invest exclusively in one single
REIFs investment regions
Americas only: 3%
North Africa only: 1%
Asia/Pacific Only: 5%
Other: 12%
EU-28 + other Europe Only: 7%
EU-28 + EFTA Only: 9%
EU 28 Only: 63%
Source: ALFI Survey 2014
Exclusive data: Each fund falls into one category.
Percentages based on the responses received
Geographical focus of fund investments by fund unit launch year (*)
June
2014
19%
2013
20%
10%
5%
15%
2012
2010
11%
16%
2009
2007
4%
15%
5%
38%
2005
3%
43%
2004
30%
2003
12%
7%
6%
3%
10%
20%
5%
2%
3%
43%
5%
12%
30%
40%
50%
70%
EFTA (non EU)
80%
Asia / Pacific
America - North
Middle East &
Others
44%
60%
Other Europe
America - Central
/ South
60%
50%
44%
0%
1%
4% 3% 1%
48%
50%
< 2000
2%
10%
44%
8%
EU - 28
3%
3% 6%
43%
11%
5%
7%
2% 5% 1%
42%
5%
3%
8%
41%
3% 6%
36%
2006
5%
56%
40%
24%
11%
42%
5% 3%
16%
2008
45%
5%
28%
8%
5%
32%
2011
44%
90%
Source: ALFI Survey 2014
8. Geographical
focus of fund
investments
100%
(*) The chart shows the details for Funds of REIFs only. This chart is not cumulative, but shows the total number of funds by
the year of launch.
Non exclusive data, i.e. funds can cover one or several regions shown. The purpose of the graph is to highlight changes in strategy over time.
17
9. Target Sectors
Similar to the findings of the 2013 ALFI Survey,
57% of the surveyed funds (134 out of 237) have
a diversified investment strategy in terms of
property types.
Residential only: 8%
Hospitality only: 1%
Other Single Specialist: 4%
Multi sector: 57%
All sectors: 4%
Office only: 4%
Retail only: 14%
Industrial only: 8%
Source: ALFI Survey 2014
Exclusive data: Each fund falls into one category.
Percentages based on the responses received
The 2014 ALFI Survey shows the stabilization of
“multi-sector” at 57% which is the middle ground
between the findings of the 2013 ALFI Survey
(59%) and the 2012 ALFI Survey (55%). The
preferred target sectors for 2013 fund launches
are office (27%) and residential (21%). The early
launches in 2014 showed a large increase, from
18% to 30%, in funds investing in retail assets.
Target sector by fund unit launch year
24%
2013
30%
27%
2012
18%
21%
2011
9%
30%
32%
2008
29%
30%
24%
31%
2005
15%
27%
15%
2003
17%
3% 3%
16%
3% 3%
3%
28%
4%
6%
0%
10%
Hospitality
40%
30%
20%
30%
40%
50%
Infrastructure
6%
100%
< 2000
Residential
7%
22%
33%
Industrial
8%
15%
Retail
3% 3%
20%
17%
22%
2% 4%
22%
23%
37%
2004
6%
18%
27%
Office
16%
13%
12%
31%
9%
5%
17%
28%
2006
23%
6%
36%
2009
2007
21%
19%
25%
22%
13%
26%
26%
2010
9%
20%
60%
70%
80%
10%
90%
100%
Non exclusive data, i.e. funds may invest in more than one sector. The purpose of the graph is to highlight changes in strategy
over time.
18
Source: ALFI Survey 2014
June 2014
NAV distribution
100%
2%
1%
4%
90%
13%
8%
15%
21%
1%
8%
21%
1%
6%
16%
1%
3%
5%
5%
18%
70%
60%
26%
18%
20%
27%
2%
22%
15%
0.5%
1%
1%
8%
16%
20%
18%
0.5% 1%
1% 3%
8%
5%
13%
13%
17%
15%
40%
800-1200
200-400
30%
44%
48%
49%
50%
52%
57%
63%
60%
56%
100-200
10%
0%
1200-1800
400-800
50%
20%
over 1800
<100
EUR millions
2006
2007
2008
2009
2010
These charts show a comparison of average
NAVs reported in the 9 years of the ALFI REIF
Survey to date.
The forecasted Target NAV averages of the survey populations illustrate the continued decrease
in the average fund size, with the median moving
from the 200-400 million euros band in 2009
2011
2012
2013
Source: ALFI Survey 2014
80%
1%
June 2014
target NAV results to the 100-200 million euros
band in the following Surveys, reflecting continued cautious forecasts for capital raising in 2014
and possibly the creation of numerous smaller
funds, while many larger funds have come to the
end of their terms.
Target NAV
100%
2%
90%
80%
28%
2%
2% 2%
4%
16%
70%
19%
27%
2%
4%
14%
21%
4%
2%
9%
1%
1% 3%
9%
10%
3%
22%
21%
19%
800-1200
18%
39%
40%
30%
25%
23%
22%
24%
10%
0%
18%
11%
2009
21%
2010
400-800
200-400
30%
30%
20%
over 1800
1200-1800
25%
60%
50%
1%
3%
1%
4%
12%
15%
1%
30%
32%
36%
2011
2012
2013
39%
48%
45%
100-200
<100
EUR millions
2014
2015
2016
19
Source: ALFI Survey 2014
10. Net Asset
Value (NAV)
Distribution
11. Gross Asset
Value (GAV)
Distribution
The results show a slight decrease in the 200-400
million GAV distribution band in 2013 with 16% of
the funds (versus 23% in 2012) falling in this
category and a continued increase in smaller
funds (46% compared to 40% in 2012).
GAV distribution
90%
80%
2%
2%
2%
2%
6%
2%
2%
8%
11%
13%
18%
18%
1%
1%
4%
2%
15%
16%
15%
21%
23%
2%
2%
6%
3%
2%
2%
5%
3%
4%
17%
19%
27%
16%
21%
21%
17%
15%
23%
13%
14%
over 1800
800-1200
21%
50%
40%
1%
1200-1800
16%
70%
60%
3%
17%
13%
35%
37%
400-800
15%
200-400
30%
20%
10%
0%
27%
2006
36%
35%
42%
40%
46%
100-200
<100
EUR millions
2007
2008
2009
2010
The range <100 million has slightly increased
in 2013 mostly due to new funds raising new
capital. Also notable in 2013 is the percentage of
funds above EUR 1.8 bn in assets, which signals
some overall optimism in relation to the return of
leverage.
2011
2012
Source: ALFI Survey 2014
100%
2013
The majority of funds’ forecast Target GAV drop
from between 200-400 million euros to lower
amounts, confirming recent trends towards
smaller funds with an exception for funds
between 800 and 1,200 million and above 1,800
million.
Target GAV
90%
80%
7%
10%
7%
13%
16%
33%
6%
5%
24%
33%
5%
23%
21%
4%
24%
4%
2%
5%
22%
2009
2010
1200-1800
15%
400-800
20%
17%
18%
200-400
100-200
18%
12%
10%
over 1800
21%
14%
7%
17%
23%
13%
9%
19%
15%
13%
2011
2012
20%
2013
27%
28%
32%
<100
EUR millions
2014
In this section, graphs exclude the funds that did not provide NAV / GAV figures.
20
2%
7%
800-1200
20%
21%
20%
0%
9%
4%
26%
40%
10%
11%
7%
4%
5%
26%
60%
30%
7%
4%
9%
70%
50%
6%
2015
2016
Source: ALFI Survey 2014
100%
12. Target
Gearing of Funds
12% of the surveyed Direct Funds show target
gearing of less than 20%. Target Gearing is down
in most of the ranges, the exceptions being the
20-30% range, 30-40% and the high-end (over
60% and 70%) target gearing ranges.
Target gearing of funds
8%
90%
80%
28%
70%
60%
12%
29%
13. Fees
21%
15%
20%
15%
13%
20%
21%
26%
31%
5%
3%
2009
3%
33%
1% 3%
2010
19%
2011
10%
2%
2012
4%
2%
13%
3%
8%
20%
9%
6%
2%
7%
2013
2014
2015
29% of the surveyed Direct Funds use GAV as
the basis for their management fee calculation,
almost the same as the findings in the 2013 ALFI
Survey and slightly lower than the corresponding
results of the 2010, 2011 and 2012 ALFI Surveys.
over 70%
60%-70%
18%
40%-50%
13%
26%
17%
31%
31%
41%
17%
50%-60%
28%
29%
20%
0%
10%
28%
40%
10%
27%
15%
50%
30%
9%
11%
7%
30%-40%
18%
20%-30%
12%
less than 20%
2016
The majority of the funds calculating their fees on
the basis of GAV charge fees of 0.51-1.0% and
69% of these funds charge management fees of
between 0.51% and 1.5%.
Management fee calculation basis for direct real estate funds
No data available: 12%
Source: ALFI Survey 2014
100%
Commitments: 13%
Other: 22%
GAV: 29%
None: 1%
NAV: 23%
Source: ALFI Survey 2014
21
Management fee range for Direct REIFs
1.01%-1.5%: 18%
0-0.5%: 21%
No data available:
12%
>1.5%: 21%
0.51%-1.0%: 28%
Source: ALFI Survey 2014
Almost half of the surveyed Direct Funds do not
levy a performance fee. For the funds charging
performance fees, 49% charge 20%. 9 Core funds
indicated a payout rate of more than 20%, while
16 Core funds have performance fees with a pay-
out rate of 20%. 59% of the Value-Added funds
(down from 69% last year) reported a payout rate
of exactly 20%, indicating that this remains the
market standard.
Performance fee charged
100%
90%
10%
24%
24%
80%
70%
60%
45%
17%
34%
50%
30%
20%
59%
45%
42%
10%
0%
Core
Value-Added
20%
22
<20%
Opportunity
>20%
Source: ALFI Survey 2014
40%
14. Number of
Investors
The ALFI Survey results show that Direct Funds
typically do not have a large number of investors.
Approximately 84% of the Direct Funds have fewer than 25 investors and 33% have 5 investors or
less, while only 2% have more than 100 investors.
This reflects the fact that the majority of investors
in such funds are institutional and thus, inherently,
there tends to be a smaller number of investors
per fund. Only 14% of funds (down from 17%)
have more than 25 investors. This corresponds
with the identified trend toward a larger number
of smaller funds.
101 + investors: 2%
no investors yet: 2%
26 - 100 investors: 12%
1 - 5 investors: 33%
6 - 25 investors: 51%
Source: ALFI Survey 2014
Virtually all of the funds surveyed have institutional investors, with “high net worth individuals”
(HNWI) investing in 69 (30%) of the funds (a 4%
increase over last years’ results).
Retail investors have invested in 9% of the funds
(a 4% decrease compared to last years’ results).
Institutional and HNW individuals continue to
represent the majority of investors in REIFs of all
sizes, with retail investors falling back to 2009
levels.
% of fund units allowing specific investor groups
100%
90%
80%
70%
60%
50%
94%
40%
Source: ALFI Survey 2014
15. Type of
Investors
30%
20%
30%
10%
0%
Institutional
HNW Individuals
20%
Private Bank
13%
Family Office
9%
Retail
Non-exclusive data: Investor groups may be indentified by fund. Percentages based on the received responses.
23
Number of investors by type of investor
investors
29%
18%
25 - 100
23%
59%
6 - 25
13%
53%
15%
1-5
10%
20%
Institutional
30%
4%
6%
40%
Private Bank
50%
60%
Family Office
The majority of investors are from Europe. However, there are also significant numbers from the
Americas (55 funds), the Asia/Pacific region (26
funds) and the Middle East (25 funds), each of
which represent a larger proportion than before,
reflecting the global appeal of the SIF regime. 110
(49%) of the surveyed funds have investors from
two to five countries and 44 (19%) have investors
70%
12%
20%
9%
67%
0%
16. Investor
Origins
18%
4%
17%
5%
6%
18%
80%
HNW Individuals
90%
4%
100%
Retail
from 6 to 10 countries, which again highlights the
success of the SIF regime as a global investment
offering. The expectation is that cross-border
marketing under the AIFMD will further expand
the reach of Luxembourg Real Estate Funds and
it will be interesting to note these results over the
coming years.
Number of investors’ countries
1 country: 27%
11 + countries: 5%
2 - 5 countries: 49%
6 - 10 countries: 19%
Source: ALFI Survey 2014
24
Source: ALFI Survey 2014
101 +
The 2014 ALFI Survey confirms the notable
increase (identified in the 2012 and 2013 ALFI
Surveys) in funds targeted for distribution in
2-5 countries (which now represent the largest
category with 110 funds), compared to the results
from 2009-2011.
Number of investor countries by launch year (*)
100%
80%
70%
20%
64%
50%
100%
14%
60%
36%
25%
29%
13%
25%
< 2000
25%
62%
54%
60%
14%
2003
2004
14%
4%
20%
0%
20%
60%
42%
3%
30%
10%
34%
50%
60%
40%
23%
17%
39%
43%
50%
23%
5%
14%
21%
7%
2005
1
2006
3%
33%
14%
2007
11 +
2008
2-5
49%
22%
23%
2009
2010
33%
33%
20%
2011
2012
2013
Source: ALFI Survey 2014
90%
June
2014
6 - 10 countries
(*) This graph shows the launch year of fund units that are included in the REIF Survey 2013. It is NOT a cumulative sequence.
17. Accounting
standards
Almost 60% of all of the surveyed funds apply
Luxembourg GAAP (Lux GAAP) as accounting
standard, with the remainder applying IFRS.
In this year’s Survey, the reporting framework
selected does differ significantly depending on
the strategy of the fund, i.e. Core (57%) and
especially Opportunity funds (72%) opt for Lux
GAAP whereas Value-Added funds are equally
represented between IFRS & Lux GAAP.
Virtually all of the surveyed funds prepare consolidated accounts.
Lux GAAP: 58%
IFRS: 42%
Source: ALFI Survey 2014
25
Prior to 2006, Luxembourg GAAP (Lux GAAP)
was the preferred standard, from 2006 to 2009,
utilization of IFRS and Lux-GAAP was more
balanced, whereas in 2011, 2012 and 2013 Lux
GAAP is again the preferred standard.
Accounting standards adopted by new fund unit launches
100%
90%
29%
80%
50%
70%
73%
75%
50%
71%
30%
50%
20%
0%
50%
64%
50%
69%
71%
77%
100%
40%
10%
53%
47%
27%
25%
< 2000
60%
2003
2004
2005
2006
2007
2008
IFRS
50%
36%
2009
2010
50%
31%
29%
2011
2012
23%
2013
June
2014
Lux GAAP
43 funds already report financial statements that
are compliant with the INREV reporting standards, an increase over previous years. In addition, 53% of the funds preparing their financial
statements under IFRS make adjustments to the
amounts reported therein to arrive at their fund
NAV, compared with 39% under Lux GAAP (30%
in 2010, 26% in 2012 and 25% in the 2013 ALFI
Survey). 39 funds using LUX GAAP make adjustments for fair value.
Number of IFRS fund units (94 in total) and
number of LUX GAAP (130 in total) adjusting for various items
50%
40%
30%
39% 38%
45%
37%
32%
30%
24%
10%
0%
6%
Formation
expenses
Transaction costs
Deferred taxation
IFRS
26
22%
Lux GAAP
Fair value
of financial
instruments
8%
Other adjustments
Source: ALFI Survey 2014
20%
Source: ALFI Survey 2014
60%
40%
The majority of Direct Funds report a quarterly
NAV, similar across all fund types (i.e. Core,
Value-Added and Opportunistic), while 13% pro-
duce a monthly NAV. Among the 51 Opportunity
funds surveyed, only 3 funds have a daily NAV.
Frequency of reporting of fund NAV
Monthly: 13%
Annual: 24%
Daily: 1%
Semi-Annual: 12%
Quarterly: 50%
Source: ALFI Survey 2014
Since 70% of funds are closed-ended, the reporting of quarterly NAV is more likely due to investor
demand for performance measurement rather
than for the purposes of pricing the issue and
redemption of units. Similar to the findings of the
2012 and 2013 ALFI Surveys, 56% of surveyed
funds rely on annual independent valuations of
their properties, while 5% opted for a monthly
valuation cycle. Almost all of the surveyed funds
use an independent appraiser in respect of their
valuations.
Frequency of reporting by investment strategy
100%
90%
6%
15%
8%
16%
80%
70%
60%
44%
35%
70%
50%
40%
10%
20%
30%
20%
10%
0%
8%
31%
23%
Core
Annual
14%
Opportunity
Semi-Annual
Quarterly
Source: ALFI Survey 2014
18. Frequency of
NAV Calculation
Value-Added
Monthly
Daily
27
Inversely to the 2011 ALFI Survey and as was the
case for the 2012 ALFI Survey, the frequency of
property valuations correlates with the frequen-
cy of reporting of NAVs. It is more balanced for
quarterly and monthly NAVs.
Direct real estate funds valuations
Annual: 57%
None: 1%
Monthly: 8%
Quarterly: 19%
Other: 1%
Semi-Annual: 14%
Source: ALFI Survey 2014
Frequency of property valuation by frequency of NAV calculation
100%
1%
90%
47%
70%
75%
60%
50%
10%
6%
100%
100%
40%
30%
52%
47%
20%
25%
10%
0%
Annual
Semi-Annual
Semi-Annual
Annual
Quarterly
Monthly
Frequency of NAV Calculation
28
Quarterly
Other
Source: ALFI Survey 2014
37%
80%
Property Valuation Frequency
Monthly
19. Valuation
Standards
Over two-thirds of the Direct Funds’ valuations are carried out under RICS Valuation and
Appraisal Standards. This is by far the leading
standard for property valuations used.
Valuation standards adopted
None: 4%
Other: 26%
TEGOVA: 1%
ISVC: 1%
RICS: 68%
Source: ALFI Survey 2014
20. Stock
Exchange Listing
Out of the 237 Direct Funds covered in this
Survey, only 19 (8%) are listed.
21. Currency
The great majority of funds report in EUR, while
7% report in USD and 4% in GBP.
Reporting currencies
USD: 7%
GBP: 4%
EUR: 85%
Other: 4%
Source: ALFI Survey 2014
29
part II - funds of real estate investment funds
1. Introduction
The first Fund of REIFs was launched in Luxembourg in 2005, more than five years after the
launch of the first Direct REIF.
Given the small number of Funds of REIFs operational in Luxembourg at the end of 2006, these
funds were not covered until the 2008 ALFI Sur-
vey, but have been covered each year since.
68% of Funds of REIFs were launched before
2010. 4 funds in 2010, 6 in 2011, 1 in 2012 and 2
funds were launched in 2013. This brings the total
number of Funds of REIFs covered by this Survey
to 40.
FoREIF units by launch year (*)
100%
90%
80%
70%
60%
50%
80%
88%
100%
100%
100%
100%
100%
100%
100%
2009
2010
2011
2012
2013
Source: ALFI Survey 2014
40%
30%
20%
10%
0%
20%
12%
2005
2006
2007
2008
Part II
SIFs
(*) The chart shows the details for Funds of REIFs only. This chart is not cumulative, but shows the total number of funds
per year of launch.
30
Out of a broad range of initiators across Europe,
German initiators have been the most prolific
since 2006, accounting for 30% of the new REIF
FoFs.
Origins of initiators of
direct real estate funds
UK: 19%
Switzerland: 8%
Nordic/Baltic: 5%
Middle East: 0.4%
US & Other
Americas: 18%
Other Europe: 14%
Canada: 1.3%
Asia / Australia & New
Zealand: 1.3%
France: 6.5%
Origins of initiators of
funds of real estate funds
Benelux: 10%
Benelux: 11.5%
Germany: 15%
Source: ALFI Survey 2014
Germany: 31%
UK: 15%
Nordic/Baltic: 5%
Other Americas: 3%
Switzerland: 5%
Other Europe: 31%
Source: ALFI Survey 2014
Origin of initiators by fund unit launch year (*)
100%
90%
France
20%
25%
Other Americas
80%
50%
50%
70%
50%
50%
50%
20%
60%
UK
Switzerland
88%
50%
20%
50%
100%
Other Europe
40%
33%
30%
50%
50%
20%
50%
40%
Germany
25%
10%
0%
Nordic/Baltic
50%
17%
12%
2005
2006
2007
2008
2009
2010
2011
Benelux
2012
2013
(*) The chart shows the details for Funds of REIFs only. This chart is not cumulative, but shows the total number of
funds by the year of launch.
31
Source: ALFI Survey 2014
2. Initiator origins
3. Legal structure
and regime
As reflected in last year’s survey only 2 out of 40
Funds of REIFs are Part II (2010 law) funds. As
all of the funds launched from 2009 to 2013 have
been SIFs, 38 of the Funds of REIFs (95%) fall
under the SIF law.
With regard to the legal structure of the funds,
over years, the FCP structure remains the pre-
ferred option over the SICAV structure (25 vs.
15). The FCP structure was chosen for 63% of the
funds.
While FCPs still constitute a small majority in
overall REIF FoFs, SICAVs are equally represented since 2007 and the 2 new funds launched in
2013 are SICAVs.
Legal structure and regime combined
SIF (FCP): 57%
Part II (FCP): 5%
SIF (SICAV - SCA): 10%
SIF (SICAV - SA): 28%
Source: ALFI Survey 2014
4. Investment
Style
83% of Funds of REIFs covered by this Survey are
classified as either core funds (24) or opportuni-
ty funds (9). There are 5 value-added Funds of
REIFs and 2 employ a mixed investment style.
Investment style by launch year
100%
12%
90%
20%
20%
25%
17%
80%
25%
70%
50%
25%
60%
100%
60%
40%
63%
20%
10%
50%
50%
50%
2009
2010
2011
50%
20%
2005
2006
2007
Core
32
100%
80%
30%
0%
33%
2008
Opportunity
Value-Added
Mixed
2012
2013
Source: ALFI Survey 2014
50%
50%
Overall, the majority of Funds of REIFs (72%) are
closed-ended. “Open-ended Funds of REIFs with
restrictions” and “Open- ended Funds of REIFs
with no restrictions” are almost equally represented in 11 fund launches, (6 funds and 5 funds
respectively) since 2005.
Open vs. closed-ended funds by launch year (*)
100%
12%
90%
13%
80%
70%
17%
25%
Closed
72%
50%
50%
60%
Open - No Restrictions
15%
60%
50%
100%
40%
100%
100%
75%
83%
75%
Open - Restrictions
13%
30%
20%
50%
50%
40%
10%
0%
Source: ALFI Survey 2014
2005
2006
2007
Closed
2008
2009
2010
Open - No Restrictions
2011
2012
2013
Open - Restrictions
(*) The graph shows the details for Funds of REIFs only. This chart is not cumulative, but shows the total number of funds by the year of launch.
Fund investment style by liquidity
100%
90%
80%
70%
7%
17%
7%
Core
40%
22%
Opportunity
60%
83%
40%
30%
40%
Value-Added
64%
20%
0%
Mixed
20%
10%
Closed
Open - No Restrictions
Source: ALFI Survey 2014
50%
Open - Restrictions
Liquidity by fund investment style
100%
90%
80%
4%
21%
25%
Closed
40%
70%
60%
20%
50%
40%
75%
100%
Open - No
Restrictions
75%
30%
40%
20%
Open Restrictions
10%
0%
Core
Opportunity
Value-Added
Mixed
33
Source: ALFI Survey 2014
5. Liquidity
6. Term
There are similar numbers of Funds of REIFs
represented in the 11-15 year and infinite life
categories. Most of the opportunity and
value-added funds still have a fund term of either
11-15 years or infinite.
58% of the core funds have a 11-15 year term
(up from the 52% of the previous survey). Only 4
funds are represented in the 8-10 year category.
Fund duration
Up to 7 years: 3%
11-15 years: 47%
Infinite: 40%
8 - 10 years: 10%
Source: ALFI Survey 2014
Fund unit duration by investment style (*)
100%
5%
6%
90%
80%
25%
21%
25%
70%
60%
19%
50%
74%
30%
50%
20%
25%
10%
0%
100%
Source: ALFI Survey 2014
40%
50%
11-15 years
Core
8 - 10 years
Opportunity
Infinite
Value-Added
Up to 7 years
Mixed
(*) The chart shows the details for Funds of REIFs only. This chart is not cumulative, but shows the total number of
funds by the year of launch.
34
While for many years, the regional focus of investments often varied from one fund to another,
recent launches focused exclusively on the 28 EU
member states.
Geographical focus of investments
Global (ex Europe): 15%
Global: 15%
Asia/Pacific only: 13%
Americas Only: 3%
EU 28 Only: 37%
All Europe only: 17%
Source: ALFI Survey 2014
Geographical investment region by fund unit launch year (*)
2013
100%
2012
100%
EU - 28
EFTA (non EU)
2011
45%
2010
11%
11%
50%
2009
23%
2007
24%
34%
18%
12%
19%
2006
23%
14%
0%
20%
19%
20%
25%
40%
Other Europe
60%
Asia / Pacific
24%
19%
10%
50%
17%
33%
60%
2005
11%
33%
33%
2008
22%
5%
10%
America Central / South
25%
80%
America - North
Source: ALFI Survey 2014
7. Geographical
focus of fund
investments
100%
(*) The chart shows the details for Funds of REIFs only. This chart is not cumulative, but shows the total number of
funds by the year of launch.
Non exclusive data, i.e. funds can cover one or several regions shown. The purpose of the graph is to highlight changes
in strategy over time.
35
8. Target sectors
As was the case with the 2012 ALFI Survey, almost all of the Funds of REIFs follow a multi-sec-
tor investment strategy. The office, retail and
residential sectors remain the most popular.
Sectoral focus of investment strategies
office / retail /
residential
5%
Mutltisector
97.5%
all sectors
16%
office / retail /
industrial / residential
/ hopitality
11%
other
21%
office / retail /
residential / industrial
24%
office / retail /
industrial
5%
Retail only
2.5%
office / retail /
industrial /
infrastructure
5%
office / retail
13%
Exclusive data: Each fund falls into only one
category.
Source: ALFI Survey 2014
Target sector by fund unit launch year (*)
2013
22%
22%
2012
12%
22%
50%
11%
11%
Office
50%
Retail
21%
2010
21%
15%
31%
2009
23%
25%
2008
22%
2007
23%
2006
0%
10%
24%
30%
40%
Residential
17%
15%
7%
17%
25%
20%
Industrial
17%
20%
24%
11%
25%
17%
25%
7%
31%
25%
27%
25%
4%
15%
25%
20%
2005
21%
6%
Infrastructure
5%
5%
3%
6%
Other
50%
50%
60%
70%
Hospitality
80%
90%
Source: ALFI Survey 2014
2011
100%
(*) The chart shows the details for Funds of REIFs only by target sector. This chart is not cumulative, but shows the total
number of funds by the year of launch.
Non exclusive data, i.e. funds may invest in more
than one of the regions indicated. The purpose of
36
the graph is to highlight changes in strategy over
time.
9. Net Asset
Value (NAV)
The 40 Luxembourg domiciled Funds of REIFs
represented a total NAV of 4.4 billion euros at
the end of 2013, compared to 4.6 billion euros in
the previous year and 3.1 billion euros at the end
of 2011. The average NAV at 31 December 2013
was 110 million euros, ranging from 3 million euros to 370 million euros. As most Funds of REIFs
do not use gearing, the NAV and GAV are similar.
NAV distribution at the end of 2013
fund units
30
25
20
Source: ALFI Survey 2014
15
10
5
0
10. 2016 Target
NAV Distribution
<100
While we note that there is currently very little
gearing in Funds of REIFs (NAV = GAV), the
100-200
200-400
EUR mio
information received in relation to target NAV is,
unfortunately, not reliable.
37
11. Fees
45% of the Funds of REIFs covered in this Survey
base their management fee on NAV, similar to the
findings of the preceeding Surveys. In the 2014
ALFI Survey, commitments as the basis for the
management fee decreased from 35% in 2012
and 29% in 2013 to 24%. GAV is the basis for
management fees for 21% of the Funds, while a
further 10% use “other” criteria. 29% of the Funds
of REIFs surveyed charge a management fee in
the mid-range of 0.51%-1%. For 45% of the Funds
of REIFs the management fee lies between 0%
and 0.5%.
FoREF Management fee basis
FoREF Management fee range
GAV: 21%
0-0.5%: 45%
Commitments: 24%
Other: 10%
1.01%-1.5%: 8%
>1.5%: 18%
NAV: 45%
0.51%-1.0%: 29%
Source: ALFI Survey 2014
39% of funds charge performance fees. 36% of these Funds of REIFs employ a hurdle rate.
Performance fee charged
100%
90%
80%
11%
25%
22%
70%
<20%
100%
50%
20%
40%
30%
75%
67%
>20%
20%
10%
0%
Core
Value-Added
Source: ALFI Survey 2014
60%
Opportunity
Performance fee hurdle rate
100%
90%
70%
50%
5%-8%
60%
100%
50%
40%
30%
20%
9%-12%
50%
10%
0%
38
Core
Opportunity
Source: ALFI Survey 2014
80%
Almost all Funds of REIFs (39) covered in this
Survey are limited to institutional investors. 1
fund is open to family offices only. All other funds
are open to institutional investors as well as to
other types of investors.
for the different investment styles, the majority
of both core funds and opportunity funds are
represented in the “6 to 25 investors” category,
whereas the value-added funds fall into the “1 to
5 investors” category.
40% of the funds surveyed have between 6 and
25 investors, while 38% have 1 to 5 investors
per fund. With regard to the number of investors
79% of the Funds of REIFs have between 1 and
25 investors.
Types of Fund of REIFs investors
Institutional & Private Bank: 5%
Institutional & Retail: 2.5%
Institutional & HNWI: 2.5%
Institutional & Private Bank & Family office: 25%
Institutional & Private Bank &
HNWI & Family Office: 2.5%
Institutional & Private Bank & HNWI & Retail: 2.5%
Institutional & Private Bank & HNWI & Family
Office & Retail: 2.5%
Family office only: 2.5%
Institutional Only: 55%
Source: ALFI Survey 2014
Exclusive data: Each fund falls into one category
Number of investors by fund launch year
100%
90%
80%
70%
20%
25%
37%
50%
50%
60%
60%
40%
50%
100%
40%
30%
20%
100%
2012
2013
75%
63%
50%
20%
50%
40%
10%
0%
100%
Source: ALFI Survey 2014
12. Type of
Investors
20%
2005
2006
2007
1-5
2008
6 - 25
2009
2010
26 - 100
2011
101 +
39
13. Accounting
standards
79% of the Funds of REIFs surveyed (and all
those launched in 2013) report under Luxembourg-GAAP, whereas for Direct REIFs, this split
is more evenly balanced.
LUX GAAP
79%
IFRS
21%
Source: ALFI Survey 2014
Accounting standard by launch year
100%
90%
80%
70%
50%
60%
60%
50%
100%
100%
100%
100%
100%
100%
100%
2012
2013
30%
20%
Source: ALFI Survey 2014
40%
50%
40%
10%
0%
2005
2006
2007
2008
2009
IFRS
14. Currency
2010
2011
LUX GAAP
As is the case for Direct REIFs, the euro is the most common currency (30 funds).
GBP: 2%
Other: 8%
USD: 15%
EUR: 75%
Source: ALFI Survey 2014
40
15. Frequency of
NAV Calculation
60% of the Funds of REIFs have adopted quarterly NAV calculations, with 10 Funds of REIFs
calculating NAV on a monthly basis. 4 Funds
of REIFs calculate NAV on an annual basis and
another 2 Funds of REIFs calculate NAV on a
semi-annual basis.
Quarterly: 60%
Semi-Annual: 5%
Annual: 10%
Monthly: 25%
Source: ALFI Survey 2014
Frequency of NAV calculation by launch year (*)
100%
20%
25%
80%
50%
60%
88%
50%
25%
80%
83%
100%
100%
40%
50%
20%
12%
0%
2005
2006
50%
20%
2007
Annual
Source: ALFI Survey 2014
80%
50%
17%
2008
Monthly
2009
2010
Quarterly
2011
2012
2013
Semi-Annual
(*) The chart shows the details for Funds of REIFs only. This chart is not cumulative, but shows the total number of
funds by the year of launch.
16. Stock
Exchange Listing
Only one out of the 40 Funds of REIFs covered
in this Survey is listed on the Luxembourg Stock
Exchange (Lux MTF).
41
Appendix
Service providers
The following service providers (listed in alphabetical order) were identified in the responses to the
survey:
Accounting - Lux Holdco’s (23)
• A3T S.A.
• Alter Domus Alternative Asset Fund Administration S.à r.l.
• Banque de Patrimoines Privés
• Brown Brothers Harriman (Luxembourg)
S.C.A.
• CACEIS Bank Luxembourg
• CITCO REIF Services (Luxembourg) S.A.
• Citibank International Plc (Luxembourg
Branch)
• Edmond de Rothschild (Europe)
• European Fund Administration S.A.
• Experta Corporate and Trust Services S.A.
• Finexis S.A.
• Fund Solutions SCA
• Grant Thornton Abax Investment Services
S.A.
• Internos Luxembourg
• Intertrust (Luxembourg) S.à.r.l
• KPMG
• Luxembourg Fund Services S.A.
• Pandomus
• RBC Investor Services Bank S.A.
• RBC Wealth Management
• SGG S.A.
• TMF Luxembourg S.A.
• Trident Trust Company (Luxembourg) S.A.
Accounting - Non Lux SPVs (15)
• Alter Domus Alternative Asset Fund Administration S.à r.l.
• Brown Brothers Harriman (Luxembourg)
S.C.A.
• CITCO REIF Services (Luxembourg) S.A.
• EY
• Forest Info OÜ
• GFB Rio Assessoria Contabil Ltda
• Golub, Lacapra, Wilson & De Tiberiis LLP
• Grant Thornton Abax Investment Services
S.A.
• Internos Luxembourg
• Knox House Trust Ltd
• KPMG
• Partners Group
• Secured capital / Corwe Horvath
• TMF Luxembourg S.A.
• Trident Trust Company (Luxembourg) S.A.
42
Auditors (10)
•
•
•
•
•
•
•
•
•
•
Artemis Audit & Advisory
BDO
Deloitte
EY
Grant Thornton
HRT Révision
KPMG
Mazars
PricewaterhouseCoopers
RSM Audit Luxembourg
Depositaries (28)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
ABN Amro Bank (Luxembourg) S.A.
Alter Domus Depositary Services S.à r.l.
Banque de Luxembourg S.A.
Banque de Patrimoines Privés
Banque et Caisse d’Epargne de l’Etat, Luxembourg
Banque Internationale à Luxembourg
Banque LBLux SA
BGL BNP Paribas S.A.
BNP Paribas Securities Services, succursale de Luxembourg
Brown Brothers Harriman (Luxembourg)
S.C.A.
CACEIS Bank Luxembourg
Citco Bank Nederland N.V., Luxembourg
Branch
Citibank International Plc (Luxembourg
Branch)
Credit Suisse (Luxembourg) S.A.
DekaBank Deutsche Girozentrale Luxembourg S.A.
DZ Privatbank S.A.
Edmond de Rothschild (Europe)
EFG Bank (Luxembourg) S.A.
ING luxembourg S.A.
KBL European Private Bankers S.A.
M.M. Warburg & CO Luxembourg S.A.
Pictet & Cie (Europe) SA
RBC Investor Services Bank S.A.
RBS Global Banking (Luxembourg) S.A.
Skandinaviska Enskilda Banken S.A.
Société Générale Bank & Trust
UBS Luxembourg S.A.
VP Bank (Luxembourg) S.A.
Central administrations (including Transfer
Agents) (47)
• Adepa Asset Management S.A.
• Alcyon S.A.
• Alter Domus Alternative Asset Fund Administration S.à r.l.
• Apex Fund Services (Malta) Limited, Luxembourg branch
• Atlantic Fund Services S.A.
• Bank of New York Mellon (Luxembourg)
S.A.
• Banque de Patrimoines Privés
• Banque et Caisse d’Epargne de l’Etat, Luxembourg
• Banque LBLux S.A.
• BNP Paribas Securities Services, succursale de Luxembourg
• Brown Brothers Harriman (Luxembourg)
S.C.A.
• CACEIS Bank Luxembourg
• CF Fund Services S.A.
• Citco Fund Services (Luxembourg) S.A.
• CITCO REIF Services (Luxembourg) S.A.
• Citibank International Plc (Luxembourg
Branch)
• Credit Suisse Fund Services (luxembourg)
S.A.
• Deka International S.A.
• Edmond de Rothschild (Europe)
• European Fund Administration S.A.
• Experta Corporate and Trust Services S.A.
• Fil Investment Management (Luxembourg)
S.A.
• Finexis S.A.
• Fund Solutions SCA
• Grant Thornton Abax Investment Services
S.A.
• Heitman International S.à r.l.
• Hines Luxembourg S.à r.l.
• Intertrust (Luxembourg) S.à.r.l
• Invesco Real Estate Management S.à r.l.
• Kredietrust Luxembourg S.A.
• LRI Invest S.A.
• Luxembourg Fund Services S.A.
• Luxglobal Trust Services S.A.
• M.M. Warburg & CO Luxembourg S.A.
• Pandomus
• ProLogis Management Services S.à r.l.
• Quilvest Luxembourg Services S.A.
• RBC Investor Services Bank S.A.
• Schroder Investment Management (Luxembourg) S.A.
• SEB Asset Management S.A.
• SEB Fund Services S.A.
• SGG S.A.
• Trident Trust Company (Luxembourg) S.A.
• Union Investment Luxembourg S.A.
• United International Management S.A.
• Universal-Investment-Luxembourg S.A.
• VPB Finance S.A.
Domiciliation and Corporate (31)
• Adepa Asset Management S.A.
• Alcyon S.A.
• Alter Domus Alternative Asset Fund Administration S.à r.l.
• Apex Fund Services (Malta) Limited, Luxembourg branch
• Atlantic Fund Services S.A.
• AVANA Investment Management Company
S.à r.l.
• Banque de Luxembourg S.A.
• Banque de Patrimoines Privés
• Banque LBLux S.A.
• Brown Brothers Harriman (Luxembourg)
S.C.A.
• CACEIS Bank Luxembourg
• CF Fund Services S.A.
• CITCO REIF Services (Luxembourg) S.A.
• Citibank International Plc (Luxembourg
Branch)
• Edmond de Rothschild (Europe)
• European Fund Administration S.A.
• Experta Corporate and Trust Services S.A.
• Finexis S.A.
• Fund Solutions SCA
• Grant Thornton Abax Investment Services
S.A.
• Intertrust (Luxembourg) S.à r.l.
• Invesco Real Estate Management Sàrl
• Kredietrust Luxembourg S.A.
• LRI Invest S.A.
• Luxembourg Fund Services S.A.
• Partners Group (Lux) S.à r.l.
• RBC Investor Services Bank S.A.
• SGG S.A.
• Structured Invest S.A.
• Trident Trust Company (Luxembourg) S.A.
• United International Management S.A.
43
Legal Advisors (25)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
44
Allen & Overy
AMMC Law
Anold & Porter (UK) LLP
Arendt & Medernach
Ashurst LLP
Baker & McKenzie
Bonn & Schmitt Avocats
Bonn Steichen & Partners
Chevalier & Sciales
Clifford Chance
CMS DeBacker Luxembourg
Dechert Luxembourg
Duvieusart Ebel, avocats associés
Elvinger Hoss & Prussen
Etude DELAGARDELLE Law
Lexfield
Linklaters LLP
Loyens & Loeff
MNKS
OGIER (Luxembourg)
OPF Partners
Peuvrel & Cayphas
SCRM
Speechly Bircham Luxembourg
Wildgen, Partners in law
Tax Advisors (19)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Allen & Overy
Arendt & Medernach
Artemis Audit & Advisory
ATOZ
BDO
Bonn & Schmitt Avocats
Capita Fiduciary
Clifford Chance
D.M.S et Associés
Deloitte
Elvinger Hoss & Prussen
EY
Grant Thornton
KPMG
Linklaters LLP
Loyens & Loeff
OPF Partners
PricewaterhouseCoopers
RSM
glossary
2010 Law
The law of December 17, 2010 on Undertakings for Collective
Investment as may be amended from time to time (“UCIs”)
2007 Law
The law of February 13, 2007 on Specialized Invesment Funds
as amended (“SIFs”)
AIFMD
Alternative Investment Fund Managers Directive, Directive
2011/61/EU of the EP and of the Council of 8 June 2011
CSSF
Commission de Surveillance du Secteur Financier (Luxembourg supervisory authority for the financial sector)
Direct Fund
Fund investing in property assets or structures holding property assets
EFTA
European Free Trade Association
EU 28
Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta,
Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia,
Spain, Sweden, United Kingdom
EU Accession
Iceland, Montenegro, Former Yugoslav Republic of Macedonia, Serbia, Macedonia, Turkey
EFTA (non EU)
Norway, Lichtenstein, Switzerland, Iceland
Emerging Europe
Albania, Belarus, Bosnia & Herzegovina, Moldova, Russia,
Turkey
FCP
Fonds Commun de Placement: Common fund, entity without
legal personality based on contractual agreement
FoREIF
Fund of Real Estate Investment Fund
GAAP
Generally Accepted Accounting Principles
GAV
Gross Asset Value
HNW
High Net Worth
HNWI
High Net Worth Individual
Indirect Fund
Fund investing in real estate securities or other Real Estate
Funds
IFRS
International Financial Reporting Standards
Initiator
Initiator origin region : Europe, Asia/Pacific/ME, Americas
Initiator origin country : The country of the ultimate parent
should be used
INREV
European Association for Investors in Non-listed Real Estate
Vehicles
Investment style
Core : Stable income returns, stabilised properties located in
strong and low risk markets; geared at less than 50%
Value Added : combination of Income and capital return;
stabilised properties located in low to medium risk markets,
as well as an element in development or opportunistic investments; geared from 40% to 70%
45
Opportunistic : primarily through capital return; higher risk
properties (e.g development projects, property repositioning,
assets in higher risk countries or distressed assets); geared is
in excess of 60%
ISVC
International Standards Valuation Committee
Liquidity
Closed-ended : Fund may not, at the request of investors,
repurchase directly or indirectly their units or shares
Open-ended : Fund may, at the request of investors, repurchase directly or indirectly their units or shares
Open-ended with restriction : in addition subject to further
conditions such as maximum number of units to be redeemed
in a period; extended notice period; early redemption penalties etc.
Semi-open ended : series of distinct equity offerings after
the initial launch, but not on a continuous basis; ability of
investors to redeem capital at certain times during the fund
life; infinite life.
46
MTF
Luxembourg Stock Exchange
NAV
Net Asset Value
REIF
Real Estate Investment Fund
RICS
The Royal Institution of Chartered Surveyors
SA
Sociéte anonyme (public limited company)
SCA
Société en commandite par actions (partnership limited by
shares)
SCS
Société en commandite simple (limited partnership)
SICAF
Société d’investissement à capital fixe (investment company
with fixed capital)
SICAR
Société d’Investissement en Capital à Risque (investment
company in risk capital)
SICAV
Société d’investissement à capital variable (investment company with variable capital)
SIF
Fonds d’investissement spécialisé (specialized investment
fund)
SOPARFI
Société de participations financières (financial holding company)
SPV
Special Purpose Vehicle
TEGOVA
The European Group of Valuers’ Associations
UCI
Undertaking for Collective Investment
acknowledgements
The ALFI Real Estate Funds Sub-Committee would like to thank the following people for their efforts
in compiling the data and commentary for the ALFI REIF Survey 2014.
Members of the REIF Publications Working Group:
Catherine Gauthier
Brown Brothers Harriman (Luxembourg) S.C.A.
Francesco Piantoni
Aviva Investors Luxembourg S.A.
Johan Terblanche
Dechert LLP (WG Co-Chair)
Keith Burman
ManagementPlus (Sub-Committee Chair)
Michael Hornsby
EY (Sub-Committee Chair)
Robert Hessing
Intertrust (WG Co-Chair)
Valerie TolletDeloitte
and
David Zackenfels
Jean-Jacques Picard
Régine Rugani
Association of the Luxembourg Fund Industry - ALFI
Association of the Luxembourg Fund Industry - ALFI
Association of the Luxembourg Fund Industry - ALFI
The ALFI Real Estate Funds Sub-Committee repeats this Survey on an annual basis in the most comprehensive form possible. ALFI encourages any relevant fund initiators or depositaries who were not
included in the 2014 ALFI Survey to contact ALFI before May 2015 to ensure inclusion.
Editor: ALFI a.s.b.l.
Photo credits: © ALFI - Régine Rugani
47
November 2014
alfi - association of the
luxemborg fund industry
B.P. 206
L-2012 Luxembourg
Tel: +352 22 3026-1
Fax: +352 22 30 93
guidelines
[email protected]
www.alfi.lu

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