Are All Open-End Core Funds Created Equal?

Fairchild, Simon; MacKinnon, Greg; Rodrigues, John

doi:10.3905/jpm.2011.37.5.051

Cited by 6 publications

(3 citation statements)

References 4 publications

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“…(As noted earlier, any robust treatment of persistence must cover at least one full market cycle.) A more recent paper by Fairchild, MacKinnon and Rodrigues () finds substantial persistence in one‐year returns by open‐end core funds; however, as the authors point out, one‐year returns do not match the investment horizons of either the funds or its investors. Tomperi () examined the self‐reported rates of return (IRRs), as aggregated by Preqin for funds closed in years 2000–2008 for a sample of value‐added and opportunistic funds, and generally found that fund size is positively correlated with returns but negatively correlated with sequence ( i.e ., the offering order within a family of funds).…”

Section: Dispersion and Persistence In Manager‐specific Resultsmentioning

confidence: 92%

Real Estate Returns by Strategy: Have Value‐Added and Opportunistic Funds Pulled Their Weight?

Pagliari

2017

Real Estate Economics

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Real estate strategies broadly fall into three categories: core, value‐added and opportunistic. This empirical examination of net returns from these three strategies indicates that, on a risk‐adjusted basis, the value‐added funds have strongly underperformed and the returns from opportunistic funds have weakly underperformed the returns available from core funds. In so concluding, this article departs from standard asset‐pricing models in two important respects: the total risk is used and the cost of borrowing increases as leverage increases. While the first departure has no substantive effect, the second departure lowers the estimate of the underperformance of noncore funds.

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Section: Dispersion and Persistence In Manager‐specific Resultsmentioning

confidence: 92%

Real Estate Returns by Strategy: Have Value‐Added and Opportunistic Funds Pulled Their Weight?

Pagliari

2017

Real Estate Economics

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“…They find that leverage and market conditions are the two most significant determinants of relative performance. Further, Fairchild et al [2011] find that leverage plays a key role in determining the market exposure of open-end core funds. Baum et al [2011Baum et al [ , 2012 establish that leverage and market beta are highly significant in the explanation of the cross-section of fund returns but that leverage overall appears to make a negative contribution to fund performance.…”

Section: Related Literaturementioning

confidence: 98%

The Role of Financial Leverage in the Performance of Private Equity Real Estate Funds

Alcock

Baum

Colley³

et al. 2013

JPM

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“…While there has been recent real estate research regarding NREF issues such as performance analysis, drivers, style, risk factors and general portfolio issues (e.g. Anderson et al ., 2016; Arnold et al ., 2021; Delfim and Hoesli, 2016; Fairchild et al ., 2011; Fuerst and Matysiak, 2013; Fuerst et al ., 2021; Krautz and Fuerst, 2015), there has been limited real estate research regarding real estate investment style, either at the real estate fund or real estate asset level. This has included assessing performance and strategic issues regarding value-add and opportunity real estate funds and real estate (e.g.…”

Section: Literature Reviewmentioning

confidence: 99%

The performance of non-listed opportunity real estate funds in China

Newell

Marzuki²,

Hoesli³

et al. 2023

JPIF

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PurposeOpportunity real estate funds are an important style of real estate investing for institutional investors seeking nonlisted real estate exposure. Importantly, institutional investors have sought exposure to the China real estate market, often via opportunity real estate funds. This has been by a pure China opportunity real estate fund (100% China opportunity real estate) or by a pan-Asia opportunity real estate fund where China opportunity real estate was part of this pan-Asia opportunity real estate portfolio. Using two bespoke China opportunity real estate indices developed by the authors, this paper aims to assess the risk-adjusted performance and portfolio diversification benefits of China opportunity real estate in a mixed-asset portfolio over 2008–2020. It also highlights critical issues for institutional investors going forward to factor into their real estate investment decision-making for effective China real estate exposure.Design/methodology/approachThis paper develops two bespoke China opportunity real estate fund performance indices to assess the risk-adjusted performance and portfolio diversification benefits of China opportunity real estate funds in a mixed-asset portfolio over 2008–2020. An asset allocation diagram is used to assess the role of China opportunity real estate in a mixed-asset portfolio via both the non-listed and listed real estate investment channels.FindingsOver 2008–2020, China opportunity real estate exposure via pan-Asia opportunity real estate funds were seen to outperform pure China opportunity real estate funds. In both formats, China opportunity real estate funds were seen to have a significant role in a China mixed-asset portfolio across most of the portfolio risk spectrum; particularly compared to listed real estate exposure in China. On-going issues regarding real estate risk management in China will take on increased importance for institutional investors seeking China real estate exposure.Practical implicationsOpportunity real estate funds are an important style of real estate investing, often used by institutional investors to gain non-listed real estate exposure in a developing real estate market. This style of real estate investing has been popular with institutional investors seeking exposure to China real estate as part of the China economic growth dynamic. The results of this research highlight the importance of opportunity real estate investing in China, both via a pure China opportunity real estate fund and via a pan-Asia opportunity real estate fund. Based on this empirical analysis, China opportunity real estate exposure is seen to be more effective via a pan-Asia opportunity real estate fund than a 100% China opportunity real estate fund. A range of practical China real estate investment issues are also highlighted for the effective delivery of China real estate exposure for institutional investors going forward; this particularly relates to the on-going risk management for real estate investment in China.Originality/valueThis paper is the first empirical research analysis of the risk-adjusted performance of China opportunity real estate and its role in a mixed-asset portfolio. Using bespoke China opportunity real estate fund indices developed by the authors, this research enables empirically-validated, more informed and practical opportunity real estate investment decision-making regarding the strategic role of China opportunity real estate in an institutional investor's portfolio. It also highlights the importance of various facets of real estate risk management in China going forward.

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Are All Open-End Core Funds Created Equal?

Cited by 6 publications

References 4 publications

Real Estate Returns by Strategy: Have Value‐Added and Opportunistic Funds Pulled Their Weight?

Real Estate Returns by Strategy: Have Value‐Added and Opportunistic Funds Pulled Their Weight?

The Role of Financial Leverage in the Performance of Private Equity Real Estate Funds

The performance of non-listed opportunity real estate funds in China

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