NFI-ODCE records a negative total return for 2020q2, a first since 2009 4th quarter.
CHICAGO, IL, July 30, 2020 – The National Council of Real Estate Investment Fiduciaries (NCREIF) released second quarter 2020 results for the NCREIF Fund Index – Open‐end Diversified Core Equity (NFI-ODCE). The NFI-ODCE consists of 25 funds, totaling $264.6 billion of gross real estate assets and $219.3 billion of net real estate assets.
NFI-ODCE total return gross of fees for the second quarter 2020 was -1.56%, down from 0.98% in the first quarter 2020, and down from 1.00% a year ago in the second quarter 2019. The income return for the quarter was 0.91%, down 0.11% from the previous quarter, and well below the five and ten-year quarterly averages of 1.06% and 1.19%, respectively. The appreciation return decreased to -2.46% for the quarter, below the previous quarter’s -0.04%, and down -2.45% from the second quarter 2019.
Quarterly NFI-ODCE Gross Return Trends
For the one-year ended June 30, 2020, the NFI-ODCE total return gross of fees was 2.22%, down from 6.41% for the one-year ended June 30, 2019 and well below the five-year annualized return of 7.31%. The one-year total return ended June 30, 2020 was comprised of 4.07% income and a -1.79% appreciation return.
NFI-ODCE returns measure fund-level performance and therefore can reflect leverage and other investments beyond properties, including cash balances. Leverage is conservative among these funds given their core strategies, ranging from 15% to 34% over the quarterly series history beginning in 2000. NFI-ODCE leverage is slightly above the 21.8% average since 2000, registering 22.3% as of the end of second quarter 2020, up from 21.9% in the previous quarter. Because the property values are marked-to-market every quarter, the increase in leverage is due in part to the decline in property values.
NFI-ODCE Leverage Trends (% of total assets)
Quarterly NFI-ODCE investor net cash flows were negative $799.7 million, compared to last quarter’s negative $220.2 million, and second quarter 2019’s negative $73.7 million. For the one-year ended June 30, 2020, contributions were $16.4 billion and distributions/redemptions were $18.3 billion, resulting in an annual investor net cash flow of negative $1.9 billion.
NFI-ODCE Investor Cash Flow Trends (4Q Rolling Total, Billions)
Additional details from the NFI-ODCE release are in the attached Snapshot Report.