Core Real Estate Funds’ Return Still Positive, But Lower Due to Value Write-downs
CHICAGO, IL, October 31, 2022 – The National Council of Real Estate Investment Fiduciaries (NCREIF) released third quarter 2022 results for the NCREIF Fund Index – Open‐end Diversified Core Equity (NFI-ODCE). The NFI-ODCE consists of 26 funds totaling $356.3 billion of gross real estate assets and $300.2 billion of net real estate assets.
NFI-ODCE total return gross of fees for the third quarter 2022 was 0.52%, down from 4.77% in the previous quarter, and from 6.63% a year ago in third quarter 2021. The since inception average quarterly total return is 2.19%. The income return was 0.81%, down from 0.87% in the previous quarter, and from 1.01% in third quarter 2021. The appreciation return was -0.28% for the quarter, well below the previous quarter’s 3.90%, and from 2021 third quarter’s 5.61%. The since inception average quarterly income and appreciation returns are 1.68% and 0.51%, respectively.
Quarterly NFI-ODCE Gross Return Trends
For the one-year ended September 30, 2022, the NFI-ODCE total return gross of fees was 22.09% comprised of 3.62% income and a 17.98% 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 below the 21.8% average since 2000, registering 21.5% as of current quarter-end, flat from the previous quarter.
NFI-ODCE Leverage Trends (% of total assets)
Quarterly investor net cash flows (investor contributions less distributions and redemptions) were positive $767.6 million compared to last quarter’s negative $873.9 million, and third quarter 2021’s negative $800.3 million. For the one-year ended September 30, 2022, contributions were $25.06 billion, and distributions and redemptions were $23.82 billion, resulting in an annual investor net cash flow of positive $1.24 billion.
NFI-ODCE Investor Cash Flow Trends (4Q Rolling Total, Billions)
Additional details from the NFI-ODCE release are in the attached Snapshot Report.