The non-listed real estate industry can improve standards of corporate governance, particularly transparency, accountability and alignment, according to a report from INREV. The results of the first INREV Corporate Governance Best Practice Review showed that levels of compliance with INREV Guidelines were good but gaps in market practice showed room for improvement.

' We would like to see more independent directors in funds, greater accountability of managers through more effective termination provisions, greater alignment of interest through more co-investment, better fee structures and controls over conflicts of interest, and generally better transparency, particularly side letters,' said Alasdair Evans, chairman of INREV's Corporate Governance Committee.

Some of the gaps highlighted in the report reflect issues raised as a result of the downturn, such as alignment of interest. Co-investment is an important indicator of alignment between fund managers and investors. The study showed that 19% of funds in the study did not have co-investment by the manager, the sponsor or individuals, and only 9% of funds have the management team transparently co-investing.

The review also identified that funds generally have limited controls to prevent conflicts of interest with other funds run by the same manager with overlapping strategies. Stronger protection for investors is required in this area, INREV found.