Total Returns Edged Higher for the September 30, 2018 Quarter and $1.0 billion of Investor Net Cash Flows was Added to the Index, a High Since March 31, 2016.
CHICAGO, IL, October 30, 2018 – The National Council of Real Estate Investment Fiduciaries (NCREIF) released third quarter 2018 results for the NCREIF Fund Index – Open‐end Diversified Core Equity (NFI-ODCE). The NFI-ODCE consists of 25 funds, totaling $247.9 billion of gross real estate assets and $206.7 billion of net real estate assets.
Quarterly NFI-ODCE total return gross of fees edged slightly higher in the third quarter 2018, to 2.09%, from 2.05% in the second quarter, and was well above the 1.87% return a year ago in the third quarter 2017. The income return for the quarter was 1.04%, down slightly by .01% from the previous quarter, and well below the ten and twenty-year quarterly averages of 1.27% and 1.51% respectively. Appreciation rose to 1.05% for the quarter, above the previous quarter’s 1.00%, and up .26% from the third quarter 2017. Although income is below long-term averages, appreciation remains well above the .19% and .63% ten and twenty-year quarterly averages, respectively.
Quarterly NFI-ODCE Gross Return Trends
For the trailing four quarters, the NFI-ODCE total return gross of fees was 8.68%, up from 7.66% for the year ended third quarter 2017 and slightly below the annualized since inception return of 8.72%. The annual total return was comprised of a 4.26% income return and 4.28% appreciation.
NFI-ODCE returns measure fund-level performance and therefore can reflect other investments beyond properties, including cash balances and leverage. 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 remains below the 21.8% average since 2000 and was 21.4% as of the end of third quarter 2018, up slightly from 21.1% in the second quarter 2018.
NFI-ODCE Leverage Trends (% of total assets)
Quarterly NFI-ODCE investor net cash flows were positive $1.0 billion, a significant increase from last quarter’s $721 million and surpassing third quarter 2017’s negative $1.6 million. For the trailing year, contributions were $17.3 billion and distributions/redemptions were $16.6 billion for an annual positive net cash flow of $759 million, reversing the annual negative net cash flow trend since March 31, 2017.
NFI-ODCE Investor Cash Flow Trends (4Q Rolling Total, Billions)
Additional details from the NFI-ODCE release are in the attached Snapshot Report.