We apply a return-based classification approach on a sample of absolute return funds registered for sale in Europe. The classification process results in eight groups with specific risk and return profiles. We describe each group by two dimensions of an underlying investment style: asset allocation and trading strategy. While the returns of one group are largely determined by the asset allocation, the returns of the other seven groups are driven by different trading strategies. Our estimated classification explains 20% of the in-sample and 13% of the out-of-sample cross-sectional return variation, which is superior to existing approaches. JEL Classification: G23

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Shares of open-end real estate funds are typically traded directly between the investor and the fund management company. However, we provide empirical evidence for the growth of secondary market activities, i.e., the trading of shares on stock exchanges. We find high trading levels in situations where the fund management company suspends the issue or redemption of shares. Shares trade at a discount when the fund management company suspends the redemption, whereas shares trade at a premium when the fund management company suspends the issue. We also find evidence that secondary market trading activity is increasing since German regulation introduced a minimum holding period and a mandatory notice period for openend real estate funds.

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