Continued Positive Changes in the Net Asset Value of Private Real Estate – October 2014

by Claire McNeil

  • 02 Oct 2014
  • RE

Analyzing average changes in NAV (net asset values) can provide insight into the performance of the private real estate market. Preqin’s Performance Analyst online service shows that Q1 2014 saw the lowest quarterly change in NAV of the last two years: 1.8% weighted and 1.3% non-weighted. The weighted metric takes into consideration fund sizes, this allows larger funds to have greater impact and provides a more realistic reflection of the real estate industry as a whole; the higher weighted figure here hence suggests that larger funds outperformed their smaller counterparts in this period.

Since Q3 2011, the quarterly change in NAV of private real estate funds has remained fairly steady. In weighted terms it has ranged between 1.5% and 5.4% and in non-weighted terms between 1.3% and 3.9%. This is in stark contrast with the relatively volatile change in NAV figures for the previous years from 2007 to 2012, when real estate funds’ unrealized values experienced extreme decreases and subsequent strong recovery. The last four quarters have, however, been slightly variable compared with the period Q2 2012 to Q1 2013, particularly in weighted terms; both measures have, however, remained positive throughout.

With private real estate dry powder and unrealized values continuing to increase each quarter, it will be interesting to see over the coming quarters whether the trend of larger funds outperforming their smaller counterparts continues.

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