How to Read a Real Estate Fund Factsheet
A practical guide to decoding fund performance reports and fee disclosures.
Why factsheets matter
A fund factsheet is the first document any investor should review before committing capital. It summarizes the fund's strategy, performance, portfolio composition, and fee structure. But factsheets are marketing documents — they are designed to present the fund in the best possible light. Knowing how to read between the lines is essential for informed decision-making.
NAV and performance returns
Net Asset Value (NAV) represents the fund's estimated value per share. Performance returns should be presented net of all fees. Watch for the distinction between time-weighted returns (TWR) and money-weighted returns (MWR). TWR removes the impact of cash flow timing and shows the fund manager's skill. MWR reflects the actual investor experience including capital call timing. Also check whether returns are annualized or cumulative — a 50% total return sounds impressive until you realize it spans 8 years.
Portfolio composition
Look for geographic diversification, sector allocation (office, residential, logistics, retail), and tenant concentration. A fund with 40% of income from a single tenant carries significant risk. Check occupancy rates — anything below 90% for a core fund should raise questions. Also examine the weighted average lease expiry (WALE) — a longer WALE means more predictable income.
Fee structure deep dive
Fees are the single biggest drag on investor returns over time. Look for management fees (typically 1-2% of assets), performance fees (typically 20% above a hurdle rate), acquisition fees (0.5-2% per deal), and disposition fees. Calculate the total expense ratio (TER) if not disclosed. A fund with a 2% management fee, 20% performance fee, and 1% acquisition fee may need to deliver gross returns above 12% for you to net a reasonable return.
Leverage and risk metrics
Check the loan-to-value (LTV) ratio. Core funds typically operate at 30-50% LTV, while value-add and opportunistic funds may go higher. Higher leverage amplifies both returns and losses. Look for the interest coverage ratio (ICR) — the fund's ability to cover interest payments from rental income. An ICR below 1.5x signals potential distress if interest rates rise or income drops.
Red flags to watch for
Beware of funds that: report only gross returns without fee impact, use aggressive valuation assumptions, have unclear or layered fee structures, show concentration in a few assets or tenants, lack independent auditing of NAV, or have limited investor reporting frequency. A well-run fund will be transparent about its methodology, honest about risks, and consistent in its reporting.
Key Takeaways
Always verify whether reported returns are net of all fees
Distinguish between time-weighted and money-weighted returns
Check tenant concentration and occupancy rates carefully
Calculate the total expense ratio to understand the full fee burden
An interest coverage ratio below 1.5x is a warning sign