Total returns for 2018q4 edged significantly lower and for the first time in 2018, investor net cash flows for the quarter were negative $918 million.
CHICAGO, IL, January 30, 2019 – The National Council of Real Estate Investment Fiduciaries (NCREIF) released fourth quarter 2018 results for the NCREIF Fund Index – Open‐end Diversified Core Equity (NFI-ODCE). The NFI-ODCE consists of 25 funds, totaling $252.6 billion of gross real estate assets and $211.4 billion of net real estate assets.
Quarterly NFI-ODCE total return gross of fees edged significantly lower in the fourth quarter 2018, to 1.76%, from 2.09% in the third quarter, and from 2.07% a year ago in the fourth quarter of 2017. The income return for the quarter was 1.01%, down 0.03% from the previous quarter, and well below the ten and twenty-year quarterly averages of 1.27% and 1.50% respectively. Appreciation decreased to 0.74% for the quarter, below the previous quarter’s 1.05%, and down 0.27% from the fourth quarter 2017. Appreciation is still above the 0.51% and 0.63% ten and twenty-year quarterly averages, respectively. On a total return basis, however, the 1.76% for the fourth quarter 2018 is just slightly lower than the ten-year average of 1.78% and well below the twenty-year average of 2.13%.
Quarterly NFI-ODCE Gross Return Trends
For the year ended 2018, the NFI-ODCE total return gross of fees was 8.35%, up from 7.62% for the year ended 2017 and below the annualized since inception return of 8.71%. The annual total return was comprised of a 4.21% income and 4.00% appreciation.
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 remains below the 21.8% average since 2000 and was 21.5% as of the end of fourth quarter 2018, up slightly from 21.4% in the previous quarter.
NFI-ODCE Leverage Trends (% of total assets)
Quarterly NFI-ODCE investor net cash flows were negative $918 million, a significant decrease from last quarter’s positive $1.0 billion, but slightly better than fourth quarter 2017’s negative $1.1 billion. For the year ended 2018, contributions were $18.4 billion and distributions/redemptions were $17.4 billion for an annual positive net cash flow of $918 million, a significant reversal from the annual negative net cash flow of $1.1 billion for the year ended 2017.
NFI-ODCE Investor Cash Flow Trends (4Q Rolling Total, Billions)
Additional details from the NFI-ODCE release are in the attached Snapshot Report.