Do specialist funds outperform? Evidence from European non-listed real estate funds

Fuerst, Franz; Mansley, Nick; Wang, Zilong

doi:10.1016/j.ribaf.2021.101434

Cited by 2 publications

(7 citation statements)

References 31 publications

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“…Hence, analysing the difference between these two types of funds allows us to understand the return and risk characteristics of long lease real estate compared to shorter lease real estate. The literature (see, among others, Delfim and Hoesli, 2016;Fuerst et al, 2021;Mansley et al, 2020) typically uses regression analysis to analyse the drivers of performance of real estate funds. Thus, we use the following regression model to examine the difference in performance between long lease funds and balanced funds:…”

Section: Regression Analysismentioning

confidence: 99%

“…All the variable definitions are listed in Appendix. Following Mansley et al (2020) and Fuerst et al (2021), we use ordinary least squares (OLS) regression to estimate the model. Alternative estimation method results and discussion are presented in the robustness check section (Section 6.3).…”

Section: Regression Analysismentioning

confidence: 99%

Section: Performance Drivers Of Long Lease Real Estate and Empirical ...mentioning

confidence: 99%

“…On a risk-adjusted basis, Bollinger and Palgliari (2019) and Pagliari (2020) found that value-added and opportunistic funds underperform core funds in the United States. Focussing on the role of specialisation, based on European private real estate funds from INREV, Fuerst et al. (2021) showed both country specialisation and country-sector specialisation are associated with superior returns while sector specialisation is not.…”

Section: Related Literaturementioning

confidence: 99%

“…Following Mansley et al. (2020) and Fuerst et al. (2021), we use ordinary least squares (OLS) regression to estimate the model.…”

Section: Performance Drivers Of Long Lease Real Estate and Empirical ...mentioning

confidence: 99%

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Long lease real estate – a revised role for real estate in pension fund portfolios

Mansley

Wang

2021

JPIF

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PurposeLong lease real estate funds (over £15bn in Q3 2020) have emerged as an increasingly important part of UK pension fund real estate portfolios. This paper explores the reasons for their dramatic growth, their characteristics and performance.Design/methodology/approachThis study uses data for the period 2004–2020 collected directly from fund managers and from AREF/MSCI and empirical analysis to explore their characteristics and performance.FindingsPension fund de-risking and regulatory guidance have supported the dramatic growth of long lease real estate funds. Long lease real estate funds have delivered strong risk-adjusted returns relative to both balanced property funds (with shorter lease terms) and the wider property market. This relative performance has been particularly strong when wider property market performance has been weak. Long lease funds have objectives aligned with liability matching and their performance suggests they are lower risk (more bond-like) investments. In addition, our analysis highlights they are far less responsive to the wider property market than balanced funds. However, they are not significantly different from balanced property funds in terms of their short-term relationship with gilt yield movements.Practical implicationsFor pension funds and other investors the paper highlights that long lease real estate funds offer a different exposure than balanced property funds. Long lease funds have objectives more closely aligned to the overall objectives for pension fund investment but are not significantly more reliable than balanced property funds in the short-term as a liability hedge. For real estate fund managers, occupiers, developers and others active in the real estate market, the paper highlights why these funds have been (and are likely to remain) attractive to investors leading to substantial demand for long lease real estate investments.Originality/valueThis is the first study to review this increasingly important part of the UK real estate fund universe.

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Section: Regression Analysismentioning

confidence: 99%

Section: Regression Analysismentioning

confidence: 99%

Section: Performance Drivers Of Long Lease Real Estate and Empirical ...mentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

“…Following Mansley et al. (2020) and Fuerst et al. (2021), we use ordinary least squares (OLS) regression to estimate the model.…”

Section: Performance Drivers Of Long Lease Real Estate and Empirical ...mentioning

confidence: 99%

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Long lease real estate – a revised role for real estate in pension fund portfolios

Mansley

Wang

2021

JPIF

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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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Do specialist funds outperform? Evidence from European non-listed real estate funds

Cited by 2 publications

References 31 publications

Long lease real estate – a revised role for real estate in pension fund portfolios

Long lease real estate – a revised role for real estate in pension fund portfolios

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

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