MSCI GLOBAL
FUND
RECONCILIATIONMETHODOLOGY
Sinha, Bithika

December 2023 2023

DECEMBER 2023

MSCI GLOBAL FUND RECONCILIATION METHODOLOGY | DECEMBER 2023

Contents

1

Introduction……………………………………………………………………………………………...3

2

Methodology Documentation Set……………………………………………………….…4

3

Fund Reconciliation Approach……………………………………………………………… 5

4

Calculation Methodology......................................................................6
4.1 Description and Calculation of Individual Layers……………………..….84.2 Calculation of Currency Impact…………………………………………………….11

5

Appendix I: Reconciliation Structures by Region………………………….…..14

6

Appendix II: Versioning Table……………………………………………………………..15© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY| DECEMBER 2023

1

Introduction
MSCI Property Fund Indexes and the Property Indexes measure the performance ofproperty funds and their underlying direct investment properties. Measurement of
portfolio performance incorporating comprehensive coverage of all financial interestsand liabilities, is a logical and necessary extension of MSCI’s standard analysis of theunderlying direct property. The requirement of a fund reconciliation analysis flows
directly from the objective to bring full transparency to an increasingly complex
market. This is now one in which the intermediation of financial strategies, including
the use of debt, cash, and indirect investment impact the critical risk/return bottomline.
The objective of ‘MSCI Global Fund Reconciliation’ (“GFR”) is to explain the rationale
behind fund performance reconciliation procedure in a simplistic and consistentmanner to ensure transparency to all users of benchmarking and to develop a detailed
understanding on the asset-to-fund reconciliation methodology. This means adding
full and consistent financial measurement to a singly defined and comprehensive
direct real estate database for all relevant fund types and mandates - open and closedended, specialist and diversified, core and opportunistic, listed and privately owned.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY | DECEMBER 2023

2

Methodology Documentation Set
MSCI Global data standards for real estate investment
The MSCI Global Data Standards For Real Estate Investment describes the data
model and provides comprehensive definitions of the data inputs and calculations
that support the measurement and reporting of performance and risk for private realestate investments.
MSCI PROPERTY INDEXES METHODOLOGY
The MSCI Property Indexes Methodology describes the general methodology that isbeing used for the calculation of the MSCI Property Fund Indexes and includes themethodology for the index composition, data requirements and index calculation
methodology.
MSCI PROPERTY FUND INDEXES METHODOLOGY
The MSCI Property Fund Indexes Methodology describes the general methodologythat is being used for the calculation of the MSCI Property Fund Indexes and includes
the methodology for the index composition, data requirements and index calculation
methodology.
MSCI GLOBAL QUARTERLY PROPERTY FUND INDEX (UNFROZEN) METHODOLOGY
The MSCI Global Quarterly Property Fund Index (Unfrozen) Methodology describes
the general methodology that is being used for the calculation of the MSCI Global
Property Fund Index and includes the specific methodology for the index
composition, data requirements and index calculation methodology.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY| DECEMBER 2023

3

Fund Reconciliation Approach
SEQUENCED APPROACH
Asset-to-fund level performance reconciliation depends as much for its effectivenesson bottom-to-top computation consistency as it does upon methodologicalapproaches, data definitions and comprehensive data collection.
Layering each financial component to build upwards from the direct investment
property level is the approach to reconciliation. This approach allows both thenumerator and denominator of the return calculation to be “impacted” as the analysis
steps up from the direct investment property level.
MSCI Global Fund Reconciliation uses a sequencing approach to overlay eachfinancial components to attribute the impact of each component on the fund’s NAV
based performance measured as part of the fund indexes.
As per sequencing method, the impact of each financial elements is shown by way ofmoving from the return on the real estate assets held in a fund (aggregating to returnon direct RE) to the bottom-line return of fund itself (gross total return) after all thefinancial elements including, debt, cash, cost, taxes, have been accounted.
This approach allows both numerator and denominator of the return calculation to be“impacted”, as the analysis steps up from the asset level. This layered approach starts
with the asset level data (i.e., direct RE asset) by calculating the gross return as thesum of the return (income + capital) of each direct RE property divided by the sum of
the capital employed in all the properties. After this, financial elements are added to
the reconciliation process as the incremental impact on the baseline of asset level
returns (i.e., direct RE returns). While moving from asset level return to the fund level
return, the reconciliation layers are arranged in a manner wherein the funds utilized
primarily for purchasing direct RE investments are captured first like leverage, cash,
other assets & liabilities and then expenses incurred by fund are captured like fundlevel costs, fund tax and fund management fees.
In each of the financial element layer, the total return and capital employed are added
to the cumulative return and capital employed of previous layer to compute the impact
as total return percentage of net total return. The total return percentage thus
calculated after including current layer is compared to the total return percentage
calculated for previous layer and the difference between the two is the impact of
current layer on the net total return.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY | DECEMBER 2023

Net Total Return
Total Fees
Gross Total Return
Total Structural Impact
Other Structural Impact (Residual)

Fund Tax
Fund Expenses
Interest Hedging
Currency Hedging
Other Investments and Fund
activities
Cash
Indirect RE Investments
Fund Level Leverage
Pure Leverage
Mark to Market
Property Level Leverage
Pure Leverage
Mark to Market
Direct Real Estate Return

4

CALCULATION METHODOLOGYFor each of the reconciliation layer the total return can be calculated as follows

𝐿𝑎𝑦𝑒𝑟 𝑛 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 =𝐿𝑎𝑦𝑒𝑟 𝑛𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟
𝐿𝑎𝑦𝑒𝑟 𝑛𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟

For the stacked return of multiple reconciliation layers, the total return (stacked) is
calculated as:
𝐿𝑎𝑦𝑒𝑟 1𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 + 𝐿𝑎𝑦𝑒𝑟 2𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 + ⋯ + 𝐿𝑎𝑦𝑒𝑟 𝑛𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟
𝐿𝑎𝑦𝑒𝑟 𝑛 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 (𝑆𝑡𝑎𝑐𝑘𝑒𝑑) = ()
𝐿𝑎𝑦𝑒𝑟 1𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 + 𝐿𝑎𝑦𝑒𝑟 2𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 + ⋯ + 𝐿𝑎𝑦𝑒𝑟 𝑛𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟

To isolate the impact of a particular layer we should calculate the difference between
the stacked return for the layer and the stacked return of the previous layer.
𝐿𝑎𝑦𝑒𝑟 𝑛𝑅𝑒𝑐𝑜𝑛𝑐𝑖𝑙𝑖𝑎𝑡𝑖𝑜𝑛 𝑖𝑚𝑝𝑎𝑐𝑡 = (𝐿𝑎𝑦𝑒𝑟 𝑛𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 (𝑆𝑡𝑎𝑐𝑘𝑒𝑑) − 𝐿𝑎𝑦𝑒𝑟 𝑛 − 1𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 (𝑆𝑡𝑎𝑐𝑘𝑒𝑑) )© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY| DECEMBER 2023

Layer

Layer Description

Step 1: Total return of the layer

Step 2: Stacked Return

Step 3: Reconciliation
ImpactNet Total Return
Total Fees
Gross Total Return

Layer 10

Total Structural
ImpactOther Structural
Impact (Residual)
Fund Tax

Total Return Fund Tax

Layer 9Fund Expenses

Total Return Fund Expenses

Layer 8Interest Rate Hedging

Total Return Interest Rate Heding

Layer 7

Currency Hedging

Total Return Currency Hedging

Layer 5

Other Investments andFund activities
Cash

Layer 4

Indirect RE

Layer 3Fund Leverage

Layer 3 (a)Pure Leverage

Layer 3 (b)Mark to Market

Layer 2

Property Leverage

Layer 2 (a)Pure Leverage

Layer 2 (b)Mark to Market

Layer 1

Direct RE

Layer 6Gross TR – Direct RE Return
Total Structural Impact - ∑Impact(Layer 2…10)

Total Return Other Investment and Fund Activities
Total Return Cash
Total Return Indirect RE
Total Return Fund Leverage

Total Return Property Leverage

Total Return Direct RE∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1 … 10
∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 … 10
∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1 … 9∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 … 9∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1 … 8∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 … 8∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1 … . 7∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 … 7

Stacked TR Layer 10 – Stacked TR∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1 … , 6∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 … 6∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1, . . 5∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 … 5∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1 … 4∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 … 4∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1. . 3∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1. . 3

Stacked TR Layer 6 – Stacked TR∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1,2∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1 ,2

Stacked TR Layer 2 – Stacked TR∑ 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟1∑ 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝐿𝑎𝑦𝑒𝑟 1

TR Direct RE© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

Layer 9Stacked TR Layer 9 – Stacked TR
Layer 8

Stacked TR Layer 8 – Stacked TR
Layer 7

Stacked TR Layer 7 – Stacked TR
Layer 6Layer 5

Stacked TR Layer 5 – Stacked TR
Layer 4

Stacked TR Layer 4 – Stacked TR
Layer 3

Stacked TR Layer 3 – Stacked TR
Layer 2

Layer 1

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY | DECEMBER 2023

4.1

DESCRIPTION AND CALCULATION OF INDIVIDUAL LAYERS
Direct Real Estate Investment (Total Return): Total return of Direct investment
properties within the fund. Includes capital appreciation and net operating income ofthe properties.
Leverage: The reconciliation impact of leverage represents the impact of borrowing
funds to finance investments within the fund. For Property fund a predominantportion of borrowed capital is used to finance the direct investment into real estate
properties. Therefore, leverage is sequenced after direct real estate return to show
the impact of borrowing capital to finance investments within the portfolio and arrive
at a levered return easily.
Leverage impact represents spread between the return on direct real estate
investments return and the cost of debt. It includes interest cost and any mark-tomarket effects on principal. If cost of debt is less than the return of direct real estate
portfolio, then the leverage contribution will be positive and increase fund returns.
Leverage impact is split into two subcomponents to differentiate the MTM impact
from cost of debt.

Mark to market Impact – MTM impact represents the impact of market movement onleverage by capturing the movement between market value of debt between two
consecutive periods. All financial assets and liabilities are periodically marked tomarket to reflect its true value based on the market conditions. Resultant gain or loss
from mark to market is recognized as gain or loss from fair value measurement in theincome statement of financial statements.

𝑀𝑎𝑟𝑘 𝑡𝑜 𝑀𝑎𝑟𝑘𝑒𝑡 𝐼𝑚𝑝𝑎𝑐𝑡 =(𝐷𝐸𝐵𝑇𝑀𝑇𝑀𝑡 )(𝐷𝐸𝐵𝑇𝑀𝑉𝑡−1 + 𝐷𝐸𝐵𝑇𝐷𝑅𝐴𝑊𝐷𝑂𝑊𝑁𝑡 )Leverage Impact – Leverage impact measures the impact of the cost of debt on thefund.
𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑚𝑝𝑎𝑐𝑡 =(𝐷𝐸𝐵𝑇𝑀𝑉𝑡 −𝐷𝐸𝐵𝑇𝑀𝑉𝑡−1 −𝐷𝐸𝐵𝑇𝐷𝑅𝐴𝑊𝐷𝑂𝑊𝑁𝑡 +𝐷𝐸𝐵𝑇𝑅𝐸𝑃𝐴𝑌𝑀𝐸𝑁𝑇𝑡 −𝐷𝐸𝐵𝑇𝑀𝑇𝑀𝑡 +𝐷𝐸𝐵𝑇𝐼𝑁𝑇𝐸𝑅𝐸𝑆𝑇𝑃𝐴𝐼𝐷𝑡 +𝐷𝐸𝐵𝑇𝐹𝐼𝑁𝐴𝑁𝐶𝐸𝐹𝐸𝐸𝑆𝑡 )(𝐷𝐸𝐵𝑇𝑀𝑉𝑡−1 +𝐷𝐸𝐵𝑇𝐷𝑅𝐴𝑊𝐷𝑂𝑁𝑡 )Fund reconciliation analysis has granularity to show the impact of property leverageand fund leverage separately. Also, each of these layers are split into MTM impact
and leverage impact as explained above.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY| DECEMBER 2023

Property Leverage – Shows the reconciliation impact of amount borrowed by funds
to finance individual direct investment properties.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦 𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒(𝐷𝐸𝐵𝑇𝑀𝑉𝑡 − 𝐷𝐸𝐵𝑇𝑀𝑉𝑡−1 − 𝐷𝐸𝐵𝑇𝐷𝑅𝐴𝑊𝐷𝑂𝑊𝑁𝑡 + 𝐷𝐸𝐵𝑇𝑅𝐸𝑃𝐴𝑌𝑀𝐸𝑁𝑇𝑡 + 𝐷𝐸𝐵𝑇𝐼𝑁𝑇𝐸𝑅𝐸𝑆𝑇𝑃𝐴𝐼𝐷𝑡 + 𝐷𝐸𝐵𝑇𝐹𝐼𝑁𝐴𝑁𝐶𝐸𝐹𝐸𝐸𝑆𝑡 )=(𝐷𝐸𝐵𝑇𝑀𝑉𝑡−1 + 𝐷𝐸𝐵𝑇𝐷𝑅𝐴𝑊𝐷𝑂𝑊𝑁𝑡 )Fund Leverage. Shows the reconciliation impact of amount borrowed by the fund tofinance property purchases, developments, or other costs requirements for the fund.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝐹𝑢𝑛𝑑 𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒(𝐷𝐸𝐵𝑇𝑀𝑉𝑡 − 𝐷𝐸𝐵𝑇𝑀𝑉𝑡−1 − 𝐷𝐸𝐵𝑇𝐷𝑅𝐴𝑊𝐷𝑂𝑊𝑁𝑡 + 𝐷𝐸𝐵𝑇𝑅𝐸𝑃𝐴𝑌𝑀𝐸𝑁𝑇𝑡 + 𝐷𝐸𝐵𝑇𝐼𝑁𝑇𝐸𝑅𝐸𝑆𝑇𝑃𝐴𝐼𝐷𝑡 + 𝐷𝐸𝐵𝑇𝐹𝐼𝑁𝐴𝑁𝐶𝐸𝐹𝐸𝐸𝑆𝑡 )=(𝐷𝐸𝐵𝑇𝑀𝑉𝑡−1 + 𝐷𝐸𝐵𝑇𝐷𝑅𝐴𝑊𝐷𝑂𝑊𝑁𝑡 )Indirect Equity Investments in Real Estate: While property funds predominantly
invest in direct real estate investments, they may also have some capital allocated toindirect equity investments, either listed or unlisted. The return on these investments
is based on the change in equity and income received from such real estate
funds/vehicles.
The returns of these indirect equity investments are closely associated with theperformance of underlying direct real estate investments held in those
funds/vehicles. This layer is therefore sequenced after direct real estate andleverage.
It shows the reconciliation impact of indirect equity investments in real estate heldby the fund.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝐼𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝐸𝑞𝑢𝑖𝑡𝑦(𝐼𝑁𝐷𝐼𝑁𝑉𝑁𝐴𝑉𝑡 − 𝐼𝑁𝐷𝐼𝑁𝑉𝑁𝐴𝑉𝑡−1 − 𝐼𝑁𝐷𝐼𝑁𝑉𝑁𝐸𝑊𝐹𝐿𝑂𝑊𝑡 + 𝐼𝑁𝐷𝐼𝑁𝑉𝑅𝐸𝐷𝐸𝑀𝑃𝑇𝐼𝑂𝑁𝑡 + 𝐼𝑁𝐷𝐼𝑁𝑉𝐷𝐼𝑆𝑇𝑡 )=(𝐼𝑁𝐷𝐼𝑁𝑉𝑁𝐴𝑉𝑡−1 + 𝐼𝑁𝐷𝐼𝑁𝑉𝑁𝐸𝑊𝐹𝐿𝑂𝑊𝑡 )Cash: Cash deposits and short-term securities in banks or other financial institutions
or facilities, normally earning interest, and available for use anywhere in the portfolio.
It Includes monies earmarked for a specific purpose and therefore not available for
immediate and general use by the fund. e.g., cash-covering derivatives.

𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝐶𝑎𝑠ℎ =(𝐶𝐴𝑆𝐻𝐵𝐴𝐿𝑡 −𝐶𝐴𝑆𝐻𝐵𝐴𝐿𝑡−1 +𝐶𝐴𝑆𝐻𝐼𝑁𝑇𝐸𝑅𝐸𝑆𝑇𝑡 )(𝐶𝐴𝑆𝐻𝐵𝐴𝐿𝑡−1 )Other Investments and Fund Activities. This layer includes other items of thebalance sheet which are not separately represented in the layering but have an
impact on the NAV of the vehicle. These include:© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY | DECEMBER 2023

I.

Other Assets - Other assets value (as recorded in the balance sheet) which is notaccounted for elsewhere.

𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝑂𝑡ℎ𝑒𝑟 𝐴𝑠𝑠𝑒𝑡𝑠 =II.

Other Liabilities - Balance sheet value of all other liabilities.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝑂𝑡ℎ𝑒𝑟 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 =III.

(𝑂𝑇𝐻𝐴𝑆𝑆𝐸𝑇𝑆𝐵𝑆𝑡 − 𝑂𝑇𝐻𝐴𝑆𝑆𝐸𝑇𝑆𝐵𝑆𝑡−1 )(𝑂𝑇𝐻𝐴𝑆𝑆𝐸𝑇𝑆𝐵𝑆𝑡−1 )(𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝐵𝑆𝑡 − 𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝐵𝑆𝑡−1 + 𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝐵𝑆𝐼𝑁𝑇𝑡 )(𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝐵𝑆𝑡−1 )Derivative Market Value - Market Value of the derivative at the end of the period.
+𝐷𝐸𝑅𝐼𝑉𝑆𝐴𝐿𝐸𝑃𝑅𝐼𝐶𝐸𝑃𝑇 + 𝑆𝑊𝐴𝑃𝑃𝐴𝑌𝑀𝐸𝑁𝑇 −𝑀𝐴𝑅𝐺𝐼𝑁𝐼𝑁𝑇𝐸𝑅𝐸𝑆𝑇 −𝐷𝐸𝑅𝐼𝑉𝐶𝑂𝑆𝑇
Total Return Derivatives = 𝐷𝐸𝑅𝐼𝑉𝑀𝑉 −𝐷𝐸𝑅𝐼𝑉𝑀𝑉 −𝐷𝐸𝑅𝐼𝑉𝑃𝑈𝑅𝐸𝐸𝑋𝑃𝑃𝑇𝐷𝐸𝑅𝐼𝑉𝑀𝑉 +𝑀𝐴𝑅𝐺𝐼𝑁 +𝐷𝐸𝑅𝐼𝑉𝑃𝑈𝑅𝐸𝐸𝑋𝑃𝑃𝑇
𝑡

𝑡−1

𝑡

𝑡

𝑡−1

IV.

𝑡

𝑡

𝑡

𝑡

Forward Commitment - Contract value of the forward commitment. This is a Grossvalue, i.e., including any potential transaction costs. This should be exactly offset by
the forward commitment liability also recorded on the balance sheet.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝐹𝑜𝑟𝑤𝑎𝑟𝑑 𝐶𝑜𝑚𝑚𝑖𝑡𝑚𝑒𝑛𝑡 =V.

𝑡

𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝑆𝑡 − 𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝑆𝑡−1 + 𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝐵𝑆𝐼𝑁𝑇𝑡𝑂𝑇𝐻𝐿𝐼𝐴𝐵𝐵𝑆𝑡−1

Acquisition Costs Capitalized - Balance sheet amount that impacts the NAV due tocapitalization of transaction costs for direct or indirect investment, arrangement feesfor debt when applicable.

Interest Rate Hedging. Interest rate hedging measures the impact of gains or losses
incurred on hedging contracts entered into with the objective offsetting the risk
associated with changes in interest rates on borrowing .

𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑅𝑎𝑡𝑒 𝐻𝑒𝑑𝑔𝑖𝑛𝑔 =(𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑅𝑎𝑡𝑒 𝐻𝑒𝑑𝑔𝑖𝑛𝑔 𝐺𝑎𝑖𝑛/𝐿𝑜𝑠𝑠)
1

Currency Hedging. Currency hedging measures the impact of gains or losses
incurred on hedging contracts entered into with the objective offsetting the risk
associated with movements in exchange rates.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝐶𝑢𝑟𝑟𝑒𝑛𝑐𝑦 𝐻𝑒𝑑𝑔𝑖𝑛𝑔 =𝐶𝑢𝑟𝑟𝑒𝑛𝑐𝑦 𝐻𝑒𝑑𝑔𝑖𝑛𝑔 𝐺𝑎𝑖𝑛/𝐿𝑜𝑠𝑠1© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY| DECEMBER 2023

Fund Costs. This layer measures the impact of expenses incurred at vehicle level. It
includes expenses such as audit costs, custodian costs, aborted purchase costs,
directors’ remuneration and fees, trustees remuneration costs etc. Charges
attributable to Special Purpose Vehicles (SPV) are also included in this layer.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛𝐹𝑢𝑛𝑑 𝐶𝑜𝑠𝑡𝑠 =𝐹𝑢𝑛𝑑 𝐿𝑒𝑣𝑒𝑙 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
1

Fund Tax. This layer measures the impact of the taxes paid by the vehicle during aperiod. The impact includes accrued or paid taxes incurred by the fund during theperiod (e.g., corporate level tax). Include tax on realized and unrealized gain on
valuation of investments (e.g., change in deferred tax liabilities during the period).
Exclude tax incurred by investors in the vehicle (withholding tax) or local taxes due
on individual properties and recoverable sales Tax (VAT/GST). Balance sheet items
should not be included in this data field. Excludes – franking credits on tax allocatedto investors.
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑟𝑢𝑛𝐹𝑢𝑛𝑑 𝑇𝑎𝑥 =𝐹𝑢𝑛𝑑 𝐿𝑒𝑣𝑒𝑙 𝑇𝑎𝑥
1

Other Structural Impacts. This is the arithmetic difference between the gross fundreturns calculated bottom-up and the top down statement of that gross fund return.
Simply put, this is the residual value which cannot be attributed to any of the financial
layers listed above.
Total Structural Impact. Sum of impacts of individual layers. This is the difference
between gross total return and direct real estate return which should should be
explained by the attribution of impact to each reconciliation layer.
Gross Total Return. -Calculated vehicle level Total Return before deduction of all
Fund Management fees
Fund Management Fee. Total of General Fund Management fees and capitalized
and/or expensed incentive fees.
Net Total Return. -Calculated vehicle level Total Return net of all Fund Management
fees.

4.2

CALCULATION OF CURRENCY IMPACT© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY | DECEMBER 2023

The objective of introducing currency impact to global fund reconciliation is todetermine the impact of holding assets in multiple currencies on global fundperformance. The global structure is designed to show the currency impact against
each financial layer from Direct RE to Fund level tax.
𝐿𝑎𝑦𝑒𝑟𝑛𝑇𝑜𝑡𝑎𝑙 𝐶𝑢𝑟𝑟𝑒𝑛𝑐𝑦 𝐼𝑚𝑝𝑎𝑐𝑡 = 𝐿𝑎𝑦𝑒𝑟𝑛𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 (𝑆𝑡𝑎𝑐𝑘𝑒𝑑,𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒) − 𝐿𝑎𝑦𝑒𝑟𝑛𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 (𝑆𝑡𝑎𝑐𝑘𝑒𝑑,𝐹𝑖𝑥𝑒𝑑)

Structural Impact

Currency Impact

Net Total Returnxx

Total Fees

xx

Gross Total Returnxx

Total Structural Impactxx

Other Structural Impact (Residual)xx

xx

Fund Tax

xx

xx

Fund Expensesxx

xx

Interest Hedging

xx

xx

Currency Hedging

xx

xx

Other Investments and Fund activities

xx

xx

Cash

xx

xx

Indirect RE Investments

xx

xx

Fund Level Leveragexx

xx

Leverage ImpactxxMark-to-Market Impactxx
xx

Property Level Leverage
Leverage ImpactxxMark-to-Market Impactxx

Direct Real Estate Return

xx

xx

xx

1. MSCI calculates currency impact of each layer as a difference between Total
return as per variable conversion method and Total Return as per fixedcurrency conversion method. Please refer to the section 4.12.1 and 4.12.2 for© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY| DECEMBER 2023

Fixed and Variable currency conversion methods from our MSCI Property
Indexes Methodology.
2. Variable currency conversion method:
For variable rate reporting, each data item is converted using thecorresponding month-end mid-rate, defined as the median of the bid andoffer rates on the last day of the month. Performance measures based on
variable rates include the impact of monthly changes in exchange rates. An
exception to this is capital expenditure data, which are weighted to the startof the month in growth measures and are converted using the previous
monthly rate. For 1994 and later data, MSCI uses exchange rates from WM
Reuters. For earlier data, rates from EcoWin and others are used.

3. Fixed currency conversion method:
Fixed rate conversion is applied to remove the impact of currency on
measure calculations. A monthly fixed rate method is applied to eliminate theneed for historical changes. The application of this methodology for different
performance measures is as follows:•

For monthly compounded growth measures, MSCI converts therelevant data using the exchange rate of the base month. For
example, the data required for December 2022 growth measures areconverted using the November 2022 exchange rate. ••For all spot measures – such as capital value, rent passing, rental
value, and capital expenditure – with data collected as at month-end,values are converted using the corresponding month-end exchange
rate. For example, December 2022 rent passing is converted using
the December 2022 exchange rate. ••Similarly for spot ratios, such as gross rent passing yield, theappropriate monthend exchange rate is used to convert both thenumerator and denominator values in the calculation. ••For measures calculated by summation over time, such as 12-month
net investment or net income per square meter (where the numerator
is calculated by summation), all values are converted using theexchange rate as at the end of final month of computation.

© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY | DECEMBER 2023

5

Appendix I: Reconciliation Structures by Region© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI GLOBAL FUND RECONCILIATION METHODOLOGY| DECEMBER 2023

6

Appendix II: Versioning Table
Version
V1

Publication
Date
December
2023

Key Changes
First release of the MSCI Global Fund Reconciliation
methodology document© 2023 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 15 OF 18

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