CREFC, NCREIF Seek Participants for First Debt Fund Index

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Two industry trade groups are attempting to create a first-of-its-kind debt fund index that would be used by managers to benchmark performance.

The two groups—the CRE Finance Council, a Washington, D.C.-based group that represents the debt markets, and the National Council of Real Estate Investment Fiduciaries (NCREIF), a Chicago-based group that represents institutional money managers—have been working on developing the index since 2019.

Although private debt accounts for almost half of institutional capital invested in U.S. real estate, currently there are no indexes of fund performance. The joint effort by CREFC and NCREIF is an attempt to improve transparency and the availability of data in the commercial debt fund arena. Achieving those goals would improve liquidity and increase debt fund allocations, according to a presentation prepared by CREFC and NCREIF.

Currently about 10 institutions have agreed to participate, but another 10 or 15 are needed to create a large enough sample to create a meaningful benchmark for the industry. Interested parties to date include a mix of life companies, pension funds, institutional money managers and debt fund managers.

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Participants would agree to provide information on their funds’ performance in 30 metrics, with the index aggregating the data for the industry. That would enable fund managers to assess how their fund’s performance stacks up to industry standards and provide information to the market about issues including property type and geographic performance, returns, loan defaults and more. The first index will likely focus on larger, open-end debt fund managers that are pursuing a “moderate risk” strategy, akin to “core-plus” investing in the equity fund parlance.

NCREIF is well known in the industry for its equity fund indexes, which have been the standard benchmark for institutional managers since the late 1970s. NCREIF collects and aggregates information from institutional managers. Its two main funds, the NCREIF Property Index and Open-End Diversified Core Index, have grown to track more than 35,000 properties in more than 150 open-end and closed-end funds.

CREFC has 17,000 members, more than 300 of which are major institutions that participate in the commercial real estate debt markets. The group provides a platform for establishing best practices, industry standards for lending and CMBS, and lobbies for federal policy relevant to the industry.

More information about the index can be found by calling CREFC at 202-448-0850 or NCREIF at 312-819-5890.