No abstract

Convexity in the flow-performance relationship of traditional asset class mutual funds is widely documented, however it cannot be assumed to hold for alternative asset classes. This paper addresses this shortcoming in the literature by examining the flow-performance relationship for real estate funds, specifically open-end, direct-property funds. This investment vehicle is designed to provide the risk-return benefits of private market real estate and is available to retail investors in many countries across the globe. An understanding of fund flow dynamics associated with this investment vehicle is of particular interest due to the liquidity risk associated with holding an inherently illiquid asset in an open-end structure. Our analysis draws on the theoretical foundations provided in the literature on mutual fund flows, performance chasing, liquidity risk, participation costs and dynamics across market cycles. We focus on German real estate funds from 1990 to 2010 as this is the largest market globally and there is a high level of confidence in the data. The results show that real estate fund investors chase past performance at the aggregate level and the relationship between flows and relative performance is asymmetric (i.e., convex) at We received excellent feedback from several discussants, including Aleksandar Andonov (2014 MNM Conference), Piet Eichholtz (2015 AREUEA-ASSA), and Michael White (2014 AREUEA-International) as well as helpful comments by participants at those presentations. We appreciate the comments and suggestions of an anonymous referee and the special issue editor S.E. Ong. All authors are grateful for generous support provided by the International Real Estate Business School (IREBS) Foundation. Downs gratefully acknowledges support by The Kornblau Institute at Virginia Commonwealth University. The views expressed in this article are those of the authors only and do not necessarily reflect the views of the European Central Bank.

No abstract

ESRBAssessing shadow bankingnon-bank financial intermediation in Europe No 10/ July 2016 4 Similarly, in a second step the FSB states: "authorities should narrow the focus for policy purposes to the subset of nonbank credit intermediation where there are (i) developments that increase systemic risk (in particular maturity/liquidity transformation, imperfect credit risk transfer and leverage), and (ii) indications of regulatory arbitrage that is undermining the benefits of financial regulation." (FSB, 2011b) ESRB Assessing shadow bankingnon-bank financial intermediation in Europe No 10/ July 2016 9 See the BCBS consultative document on the identification and measurement of step-in risk (BCBS, 2015), which raises issues of identification of unconsolidated entities to which a bank may provide financial support. The BCBS document proposes potential approaches to reflect step-in risk in prudential measures. See also, for example, Cetorelli ( 2014) and Claessens and Ratnovski (2014). ESRB Assessing shadow bankingnon-bank financial intermediation in Europe No 10/ July 2016 12 See, for example, FSB (2011b), p. 4.13These metrics overlap to some extent with those suggested by the FSB in its Workstream 3 on other shadow banking entities, as well as with those mentioned in the FSB"s global shadow banking monitoring reports. In line with this FSB approach, the ESRB also takes into account credit intermediation and the interconnectedness with the banking system. However, whereas the interconnectedness is included in a separate section in the FSB reports, the ESRB decided to classify it as an additional indicator category. ESRBAssessing shadow bankingnon-bank financial intermediation in Europe No 10/ July 2016 14 Academic concerns about the interactions between funding and market liquidity (see, for example, Brunnermeier and Pedersen, 2009) were emphasised more recently by the Bank of England (see, for example, Box 4 in the Bank of England"s December 2014 Financial Stability Report). 15 Pozsar (2014) calls for "Flow of Collateral, Flow of Risk, Flow of Eurodollar satellite accounts to supplement the Financial Accounts". 16 In order to assess risks in the investment fund and market-making sectors, the ESRB conducted a data collection exercise covering 274 EU asset management firms and 1,668 fixed-income investment funds in 2015.17Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012. ESRB Assessing shadow bankingnon-bank financial intermediation in Europe No 10/ July 2016 ESRB Assessing shadow bankingnon-bank financial intermediation in Europe No 10/ July 2016 Entity-based mapping of shadow banking in Europe 9 ESRB Assessing shadow bankingnon-bank financial intermediation in Europe No

No abstract