How Active Is Your Real Estate Fund Manager?

Abstract

Using a holdings-based measure of active management termed the 'Segment Active Share', the paper documents that commercial real estate portfolios that are more active -i.e., have segment weights which are least like those of the index -have outperformed. Employing proprietary IPD data for 256 U.K. real estate funds over 2002-2011, we find that funds with high Segment Active Share on average outperformed the real estate market by 1.9% per year. These funds do not seem to take increased risk and their outperformance cannot be explained by fund size alone, though on average they are smaller funds.

Portfolio Manager Compensation in the U.S. Mutual Fund Industry

“…Results are the same if we replace Tracking error volatility with Cremers and Petajisto's () active share measure.…”