NFI-ODCE Index Overview March 2017 Aon Hewitt Retirement and - - PowerPoint PPT Presentation

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NFI-ODCE Index Overview

March 2017

Aon Hewitt | Retirement and Investment Proprietary & Confidential Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

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NFI-ODCE Index

• NCREIF’s Open-End Diversified Core Equity Index (NFI-ODCE)

– is a value weighted, time weighted return index – comprises 24 open-end real estate funds – reflects Fund level performance, reported both gross and net of fees

• Index Statistics:

(as of 12/31/16)

NFI-ODCE Index

# Funds 24 GAV ($Bil.) $217.8 NAV ($Bil.) $174.3 # Assets 2,510 Average Asset Size ($Mil.) $86.8 Average Occupancy % 92.7% Leverage % 21.7% Cash 3.6%

Source: NCREIF, 12/31/2016

Aon Hewitt | Retirement and Investment Proprietary & Confidential Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

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NFI-ODCE Index: Inclusion Criteria

• Key requirements for inclusion:

– The fund must market itself as a diversified core investment strategy, primarily investing in private equity real estate, as follows:

• Real Estate: 80% of net assets invested in real estate
• Investments: 80% of real estate net assets must be in private equity real estate properties
• Domain: 95% of real estate net assets must be located in the U.S.
• Property Types: 80% of real estate net assets must be invested in office, industrial, apartment,
• r retail properties
• Life Cycle: 80% of real estate net assets must be invested in operating properties
• Leverage: No more than 40% leverage
• Diversification: No more than 65% invested in one property type or region

Source: NCREIF, 12/31/2016

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NFI-ODCE Index: Current Fund Contributors

Growth of Funds in Index

5 10 15 20 25 2000 2004 2008 2012 2016

# of Funds

Source: NCREIF, 12/31/2016 Source: AHIC, 9/30/2016

24 14

0% 100% % of Index JPM-SPF Prudential-PRISA UBS -TPF MS-PPF RREEF-America Fund II Invesco-CRE ING CP-LPF Principal-USPA Heitman -HART AEW-CPF Bentall Kennedy-MEPT ASB-AREF American-CRF AFL-CIO-BIT Cornerstone-PF La Salle Blackrock-GF MetLife-CF TIAA-CREF Stockbridge-SMF CBRE NYL - Madison CPF Guggenheim-USPF L&B-CIP

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NFI-ODCE Index: Property Type and Geographic Distributions

Office 36.9% Apartments 24.3% Retail 20.2% Industrial 14.7% Hotel 0.7% West 40.6% Other 3.3% South 19.0% Midwest 9.7% East 30.7%

Source: NCREIF, 12/31/2016

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NFI-ODCE Funds: Use of Leverage

Max

• ODCE Avg

Min

• Use of leverage in the Index

tends to fluctuate with the real estate cycle

• Leverage rose significantly

leading into and during the global financial crisis (GFC)

• Use of leverage since the

GFC has been more moderate on average

• Variance between funds is

significant

0% 5% 10% 15% 20% 25% 30% 35% 40% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

21.7% 33.5% 3.6% 6.7%

Source: NCREIF, AHIC, 12/31/2016; box chart 9/30/2016

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NFI-ODCE: Long Term Performance

• Annual income returns have been relatively stable throughout the history
• Appreciation exhibits considerably greater variance, following the general trend of the real estate

market cycle

• 50%
• 40%
• 30%
• 20%
• 10%

0% 10% 20% 30% 1978 1983 1988 1993 1998 2003 2008 2013 Appreciation Income Total Return

Since Inception (annualized averages): Total Return: 8.06%

Income Return: 6.3%; Appreciation Return: 1.7%

Source: NCREIF, AHIC, 12/31/2016

7.79% 19.3%

• 35.7%

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NFI-ODCE Funds: Return Quartiles

• Long term, fund returns across the NFI-ODCE universe tend to converge
• Leverage explains a large percentage of the performance variance

Source: NCREIF, AHIC, 9/30/2016

Max

• ODCE

Min

Aon Hewitt | Retirement and Investment Proprietary & Confidential Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

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NFI-ODCE Funds: Income Return Quartiles

Max

• ODCE

Min

Source: NCREIF, AHIC, 9/30/2016