THE PROPERTYCOUNCIL OF
AUSTRALIA/MSCIAUSTRALIAUNLISTED RETAILQUARTERLYPROPERTY FUNDINDEX (UNFROZEN)_

October 2021October 2021

OCTOBER 2021

Contents
1

Introduction............................................................................................. 3

2

Methodology Documentation Set .......................................................... 4
2.1

MSCI Real Estate Index Policies...................................................... 4

2.2

MSCI Property Fund Indexes Methodology..................................... 4

2.3 The Property Council of Australia/MSCI Australia Unlisted Retail
Quarterly Property Fund Index (Unfrozen) Methodology .......................... 4
3 The Property Council of Australia/MSCI Australia Unlisted Retail
Quarterly Property Fund Index (Unfrozen) Methodology.............................. 5
3.1

Initial Inclusion Requirements ......................................................... 5

3.2 Additional Criteria for inclusion Into the ‘Core Funds’ series of The
Property Council of Australia/MSCI Australia Unlisted Retail Quarterly
Property Fund Index (Unfrozen)................................................................. 5

4

3.3

Change in Composition.................................................................... 6

3.4

Index Series ...................................................................................... 7

Data Provision Requirements................................................................. 7
4.1

Net Asset Value Reporting Requirements ....................................... 7

4.2 Indirect Holdings (units in other funds) Discontinued from Q32021 7
5

Index Calculation Methodology ............................................................. 8
5.1

Methodology Transition ................................................................... 8

5.2

Weighting .......................................................................................... 8

5.3

Data Preparation For Index Calculation .......................................... 8

5.4

Rules for Performance Reporting .................................................... 9

5.5

Unfrozen History Reporting.............................................................. 9

6 Appendix I: Inclusion criteria – The Property Council ofAustralia/MSCI Australia Unlisted Quarterly Property Fund Index(Unfrozen)..................................................................................................... 10
7

Appendix II: Versioning Table .............................................................. 11© 2021 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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1

Introduction
The objective of The Property Council Of ‘Australia/MSCI Australia Unlisted Retail
Quarterly Property Fund Index (Unfrozen)’ (“Australia Retail PFI”) is to represent theperformance of Australia-based unlisted pooled real estate funds for retail (individual)
investors. From Q3 2021 results reporting onwards, the Australia Retail PFI is valueweighted, based on the capital employed (Until Q2 2021 results reporting, it was basedon the Net Asset Value (NAV)) of its constituent property funds each month and isdenominated in Australian Dollars (AUD). Both open-ended as well as closed-ended
funds are eligible for inclusion in the index.
Retail funds are defined as those that are structured to accept investment fromindividuals and where the investments are pooled and invested by an investment
manager. The investment amount is typically small in value as defined by1 Australian
Securities and Investments Commission (ASIC).

1 An investor that does not meet one of the tests to qualify as a wholesale client is a "retail client" . As per ASIC:A person may fallwithin the definition of a wholesale client if, among other things, they are: (a) a person purchasing a financial product, or a financial
service related to a financial product, where the value of the product is above the prescribed threshold (currently set by the
Corporations Regulations at $500,000); (b) a person with certified net assets of at least $2.5 million or a person who had a grossincome for each of the past two financial years of at least $250,000; or (c) a ‘professional investor’. This category includes AFS
licensees, listed entities, banks and friendly societies, and other entities that may be presumed to have the expertise or access to
professional advice to justify their being treated as wholesale.

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2

Methodology Documentation Set
The construction and maintenance rules for the Australia Retail PFI are collectively
described in the following documents:

2.1

MSCI REAL ESTATE INDEX POLICIESThe MSCI Real Estate – Index Policies document describes the various governancepolicies related to the construction, maintenance and termination of the MSCI Private
Real Estate indexes to provide consistency in decisions and avoid ambiguity in its
responses to particular events.

2.2

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.

2.3

THE PROPERTY COUNCIL OF AUSTRALIA/MSCI AUSTRALIA UNLISTEDRETAIL QUARTERLY PROPERTY FUND INDEX (UNFROZEN)METHODOLOGYThis document includes the rules and methods specific to the Australia Retail PFI.

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3

The Property Council of Australia/MSCI Australia
Unlisted Retail Quarterly Property Fund Index(Unfrozen) Methodology

3.1

INITIAL INCLUSION REQUIREMENTS
INCLUSION REQUIREMENTS FOR THE PROPERTY COUNCIL OF AUSTRALIA/MSCIAUSTRALIA UNLISTED RETAIL QUARTERLY PROPERTY FUND INDEX (UNFROZEN)In addition to the standard MSCI requirements for MSCI Property Fund Indexes (refer
to MSCI Property Fund Indexes Methodology for further details), there are additional
eligibility requirements for initial inclusion in the Australia Retail PFI. The fund should:
1. Not be listed on a stock exchange
2. Accept investments by retail investors
3. Be domiciled in Australia

3.2

ADDITIONAL CRITERIA FOR INCLUSION INTO THE ‘CORE FUNDS’ SERIESOF THE PROPERTY COUNCIL OF AUSTRALIA/MSCI AUSTRALIA UNLISTEDRETAIL QUARTERLY PROPERTY FUND INDEX (UNFROZEN)The Core Series of Australia Retail PFI comprises of funds that adhere to specificcriteria relating to their investment mandate and their structure based on the intended
strategy as set out in fund documentation. Each of constituents of the Australia Retail
PFI are checked every quarter for their adherence to the criteria of the investment
mandate and structure as mentioned below.
1. Vehicles with at least 90% of their Gross Asset Value (GAV) invested in direct realestate within Australia
2. Vehicle should have no more than 20% of their Gross Asset Value exposure
towards development activities
3. Vehicles must be registered with ASIC as a managed investment scheme
4. Vehicles must not capitalise interest on borrowings
5. Vehicles must carry no more than 50% leverage, where leverage is defined as theratio of total debt to the fund’s GAV© 2021 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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3.3

CHANGE IN COMPOSITION
The addition of new funds and withdrawal/termination of existing funds are normal
events in the evolution of the MSCI Property Fund Indexes. There are additional
requirements and clarification for the Australia Retail Index.
New Funds:
1. are required to provide sufficient and complete data to compile the longest
possible history of their investment performance, subject to a minimum of either
three years or the period from date of launch of the fund.
2. must always provide descriptive data – GAV, NAV, and asset allocation, fordisclosure in the index products for the longest possible time period, subject to aminimum of either three years or the period from date of launch of the fund.
Removed/Withdrawn Funds:
1. Withdrawal from the Index should be through written communication to MSCI andwhere possible, at least one quarter prior to the next Index release.
Re-admitted Funds:
1. In order to be re-admitted to the Index, the funds must provide MSCI with the data
to calculate their investment performance during the whole period since their last
inclusion in the Index.
2. Re-admitted funds are subject to the same eligibility requirements as potential new
constituents.
Formal communication of a material change in the index composition will be done
through an Index Announcement made available at www.msci.com, in accordancewith the thresholds as defined in the MSCI Real Estate – Index Policies.

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3.4

INDEX SERIESThe standard index publication consists of a ‘Core Funds’ series of Australia Retail
PFI index.
The Property Council of Australia/MSCI Australia Unlisted Retail Quarterly Property
Fund Index – Core Funds Series (Unfrozen): The ‘Core Funds’ series is a subset ofAustralia Retail PFI. It includes funds whose strategies meet the criteria for inclusionin the Core Series as defined in section 3.2, in addition to inclusion criteria defined in
section 3.1. This index series has a base date of 30 September 2009.
The Property Council of Australia/MSCI Australia Unlisted Retail Quarterly Property
Fund Index – All Funds Series (Unfrozen): This series constitutes all funds which arepart of Australia Retail PFI based on inclusion criteria mentioned in section 3.1.
Alongside standard index publication, MSCI publishes an ‘All Funds Index’ series in
MSCI’s market information product.

4

Data Provision Requirements

4.1

NET ASSET VALUE REPORTING REQUIREMENTS
In addition to the standard requirements, as part of the MSCI Global Data Standards
for Real Estate Investments, there are additional requirements for the NAV. These
requirements are:
1. Vehicles are required to report their NAV on at least a Quarterly basis and to havedone so for the whole of the period of their performance history within the Indexes.
2. Constituents of the Indexes must agree to calculate their NAV on a consistentbasis from quarter to quarter. This basis will that specified in their own articles ofassociation (or equivalent).

4.2

INDIRECT HOLDINGS (UNITS IN OTHER FUNDS) DISCONTINUED FROM Q3
2021
Until Q2 2021, constituents of the Index, had to disclose on a quarterly basis to MSCI
the extent of their holdings in other funds (indirect investments/crossholdings) thatare also constituents of the Index. This practice is discontinued from Q3 2021
onwards.

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5

Index Calculation Methodology

5.1

METHODOLOGY TRANSITIONMSCI consulted with the real estate investment community on the incorporation of atime-weighted return methodology including adjustment for daily-weighted external
cash flows for use in the MSCI Property Fund Indexes methodology for returncalculation, index weighting methodology and discontinuation of cross holdings for
MSCI Australia Retail Property Fund Index.
As announced in April 2020 following the public consultation, the new methodology isimplemented on a moving forward basis starting Q3 2021 results reporting of MSCI
Australia Retail PFI. There is no impact to the historical results of the index due to themethodology change, because the change has been implemented on a moving
forward basis only.
Starting Q3 2021 results reporting, the Australia Retail PFI Methodology is constructedby applying the Time-Weighted Return computation methodology as detailed in the
MSCI Property Fund Indexes Methodology (Section 4.3). Until Q2 2021, the Australia
Retail PFI Methodology was constructed by applying the unitized computation
methodology as detailed in the MSCI Property Fund Indexes Methodology (Section
4.2). Longer term returns are calculated based on the combination (splicing) of thetwo methodologies.

5.2

WEIGHTING
The funds included in the Australia Retail PFI until Q2 2021 are weighted according totheir NAV at the end of the month (measurement period). Starting Q3 2021, the funds
in the index will be weighted based on the capital employed, which is derived asprevious period Net Asset Value (NAV) adjusted by external cashflows.

5.3

DATA PREPARATION FOR INDEX CALCULATIONCROSS HOLDING ADJUSTMENT DISCONTINUED FROM Q3 2021
Starting Q3 2021 results reporting of the MSCI Australia Retail PFI, the crossholdings adjustments are discontinued. This change is implemented on a moving
forward basis and there is no impact of this change to the historical results . By
discontinuing the adjustments for cross-holdings, the sum of the sub-indexes
composition would be equal to the index composition based on NAV.
CROSS HOLDING ADJUSTMENT FOR HISTORICAL PERIODS BEFORE Q2 2021

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Until Q2 2021, MSCI has adjusted for cross-holdings in the Australia Retail PFI and all
the sub-indexes within Australia Retail PFI.
When one fund in the Australia Retail PFI has an interest in another fund included in
the Index, the performance of the fund that is cross-held will contribute directly at aweight of 100% of its total NAV as well as indirectly, with its additional weight
depending upon the ownership percentage held within the cross-holding interest. The
cross-holding adjustment was being made by deducting the amount of theinvestment from the NAV of the fund in which the investment was made. This same
adjustment is made for all the sub-indexes within Australia Retail PFI only if a crossholding is prevalent within any/all of these sub-indexes.

5.4

RULES FOR PERFORMANCE REPORTING
MSCI applies both the standard confidentiality rule, and the fund dominance rule, todetermine if index results will be made available. Please refer to MSCI Property Fund
Index Methodology for details.

5.5

UNFROZEN HISTORY REPORTING
The returns of Australia Retail PFI are unfrozen, which means they do not have fixedhistories and returns will be updated when new data becomes available or corrections
are made. Therefore inclusion of a new fund with historical data impacts the historicalindex returns. MSCI evaluates from time to time, the need to determine if it is suitable
to freeze the Index.

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6

Appendix I: Inclusion criteria – The Property Council ofAustralia/MSCI Australia Unlisted Quarterly Property
Fund Index (Unfrozen)
Inclusion criteria - Australia Retail PFI
1. Type of Investment Vehicle

Unlisted property funds for retailinvestors

2. Minimum Direct Real Estate investment inAustralia*

90% of GAV

3. Registered with Australian Securities &Investments Commission (ASIC) as amanaged investment scheme *Yes

4. Maximum fund gearing*

50% of GAV

5.Maximum development exposure*

20% of GAV

6. Interest on borrwings*

Should be expensed, notcapitalized

7. Data provision requirement

Longest possible history, subject
to a minimum of either three
years, or the period from the dateof launch of the fund

8. Structured for Retail investors

Yes* Applies only for inclusion in Core Funds Series© 2021 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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7

Appendix II: Versioning Table
Version
V1

Publication
Date
October 2021

Key Changes
Release of the Property Council ofAustralia/MSCI Australia Unlisted Quarterly
Property Fund Index (Unfrozen) Rules© 2021 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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