Another Look at Private Real Estate Returns by Strategy

Bollinger, Mitchell A.; Pagliari, Joseph L.

doi:10.3905/jpm.2019.1.098

Cited by 26 publications

(11 citation statements)

References 16 publications

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“…Yet, as seen in panel B of the table, performance has been at-or below-target. Bollinger and Pagliari (2019) and Gupta and Van Nieuwerburgh (2019) provide evidence of 3-4% underperformance on a risk-adjusted basis. Given that GPs regularly miss hitting promised return targets, with poor riskadjusted returns as documented in recent academic studies, how is it that pension funds continue to allocate to value-add and opportunity PERE funds?…”

Section: Ivc Lake Wobegon Benchmarking Of the Marvelous Kindmentioning

confidence: 96%

“…To date these funds have not delivered returns that were promised at the time of investment. Bollinger and Pagliari (2019) estimate that over their 2000-2017 sample period, Value-add and Opportunity funds underperform on a risk-adjusted basis by about 3% a year. In analyzing data over the same time frame, but using different data sources and methods, Gupta and Van Nieuwerburgh (2019) estimate that PERE funds underperform by 3-4% a year.…”

Section: Introduction and Overviewmentioning

confidence: 99%

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Pension Funds and Private Equity Real Estate: History, Performance, Pathologies, Risks

Riddiough¹

2020

SSRN Journal

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I study the history and performance of commercial real estate (CRE) in the pension fund portfolio, showing how many plan sponsors fundamentally changed their approach to CRE investment once underfunding gaps began to emerge in the early and middle 2000s. Several new empirical facts are presented, including pension fund share ownership estimates of private equity real estate (PERE) in excess of 50%, reconfirmation of underperformance of Value-add and Opportunity PERE funds, and the apparent existence of an illiquidity price premium paid by pension funds for the "volatility veil" that PERE fund investment provides. Three types of concentration risks are identified, including high geographical ownership concentrations. I argue the risks that pension funds and their investment in PERE funds pose to economic and financial stability have been exacerbated by the negative aftershocks of the COVID-19 pandemic.

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Section: Ivc Lake Wobegon Benchmarking Of the Marvelous Kindmentioning

confidence: 96%

Section: Introduction and Overviewmentioning

confidence: 99%

Pension Funds and Private Equity Real Estate: History, Performance, Pathologies, Risks

Riddiough¹

2020

SSRN Journal

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“…Given this expanding research focus on NREFs, recent research has seen an extension of the aforementioned research areas to include more specific issues relating to NREFs. This includes various aspects of advanced portfolio management such as the factors influencing performance (Arnold et al , 2019), fund strategies (Bolinger and Pagliari, 2019), fund manager discretion and the role of dry powder (Arnold et al , 2017), impact of investment horizons on performance (Delfim and Hoesli, 2019), new fund openings (Downs et al , 2017) and attribution analysis of NREFs (Fisher and D'Alessandro, 2019). This increased recent level of research on NREFs has added considerably to our depth of understanding of the contribution of NREFs as an important real estate vehicle for institutional investors.…”

Section: Literature Reviewmentioning

confidence: 99%

A real estate portfolio management risk assessment framework for nonlisted real estate funds in India

Gupta

Newell

2020

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PurposeThis study provides an extensive risk assessment framework for nonlisted real estate funds' (NREFs) portfolio management in India across their life cycle; that is, the investment stage, the monitoring stage and the exit stage in an emerging market context. The study of risk across these three stages is a new addition to the literature and assumes importance in the context of real estate portfolio management for NREFs in the emerging markets (e.g. India), which are predominantly an opportunistic investment play.Design/methodology/approachThe risk assessment framework is built on the multiactor/multicriteria risk priorities, using analytical hierarchy process (AHP), obtained from 35 experts in four real estate fund management professional groups; namely, investors/fund managers, valuers, consultants and international developers.FindingsThe results demonstrate that the real estate portfolio management risk priorities change across the three life cycle stages of the fund. At the investment stage, specific risks are most critical; at the monitoring stage, it is important to concentrate on all three risks – specific, systematic and management risks; and at the exit stage, systematic risk plays a crucial role. Real estate portfolio management risk evaluation at the subfactor level shows that investee/partner and location selection needs to be critically evaluated at the time of the investment; project execution and quality of development must be monitored during the construction/monitoring period; and repatriation of the funds, currency volatility and exit risk (resale) are critical at the exit stage of the fund.Practical implicationsThe understanding of the real estate portfolio management risk transformation across the life cycle stages is crucial for NREF managers for risk minimization, transfer and mitigation strategy formulation in their real estate portfolios. Unlike previous research that evaluates investment risk, this study breaks the NREF's risks into the investment, monitoring and exit stages. The key risk factors for each stage depend on the NREF's real estate activities for that stage. These activities, in turn, give rise to a typical risk profile for that stage. The findings are crucial for the various stakeholders of real estate fund management and policymakers in an emerging market context; particularly India, one of the fastest growing major economies in the world.Originality/valueThis risk assessment framework for simultaneously assessing risk across the three life cycle stages of NREFs is a new addition to the literature.

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“…Globally, investments in commercial real estate have shown diverse trends. Bollinger and Pagliari (2019) argue that most commercial real estate developers opt for diversified portfolios that bring appropriate yields over time. The recent global outlook report indicates that the USA commercial real estate investment market registered a downward trend as compared to the Asia Pacific and European real estate investment markets, which earned 6% and 8% returns, respectively (Rossi and Vismara, 2018).…”

Section: Introductionmentioning

confidence: 99%

Cognitive bias, intuitive attributes and investment decision quality in commercial real estate in Uganda

Kinatta

Kaawaase

Munene

et al. 2021

JPIF

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PurposeThis study examines the relationship between investor cognitive bias, investor intuitive attributes and investment decision quality in commercial real estate in Uganda.Design/methodology/approachA cross-sectional research survey was used in this study, and data were collected from 200 investors of commercial real estate in Uganda using a structured questionnaire. Hierarchical regression analysis was used to test the hypotheses derived under this study.FindingsThe results indicate that investor cognitive bias and investor intuitive attributes are positive and significant determinants of investment decision quality in commercial real estate. In addition, the two components of Investor cognitive bias (framing variation and cognitive heuristics) are positive and significant determinants of investment decision quality, whereas mental accounting is a negative and significant determinant of investment decision quality. For investor intuitive attributes, confidence degree and loss aversion are positive and significant determinants of investment decision quality, whereas herding behavior is a negative and significant determinant of investment decision quality in commercial real estate in Uganda.Practical implicationsFor practitioners in commercial real estate sector should emphasize independent evaluation of investment opportunities (framing variation), simplify information regarding investments (Cognitive heuristics), believe in own abilities (Confidence degree), be risk averse (loss aversion) and avoid making decisions based on subjective visual mind (mental accounting) and group think/herding in order to make quality investment decisions. For policymakers, the study has illuminated factors such as provision of reliable information that ought to be taken into account when promulgating policies for regulation of the commercial real estate sector. This will help investors to come up with investment decisions which are plausible.Originality/valueFew studies have focused on investor cognitive bias and investor intuitive attributes on investment decision quality in commercial real estate. This study is the first to examine the relationship, especially in the commercial real estate sector in a developing country like Uganda.

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Another Look at Private Real Estate Returns by Strategy

Cited by 26 publications

References 16 publications

Pension Funds and Private Equity Real Estate: History, Performance, Pathologies, Risks

Pension Funds and Private Equity Real Estate: History, Performance, Pathologies, Risks

A real estate portfolio management risk assessment framework for nonlisted real estate funds in India

Cognitive bias, intuitive attributes and investment decision quality in commercial real estate in Uganda

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