Class Differences in Real Estate Private Equity Fund Performance
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Real estate private equity (REPE) funds are often differentiated by risk class: Core, Value-Added, or Opportunistic. Fund class is used by investors and managers to allocate funds and to describe investment policies. In this paper, we use REPE fund cash flow data from Burgiss that allow us to calculate a variety of performance metrics. For a subset of the data, we also observe characteristics of underlying fund holdings. Despite evidence that Value-Added and Opportunistic funds differ in investment composition, we show that class does not do a good job of predicting differences in performance. Unsurprisingly, greater investment in development (as assessed ex post), predicts poor performance for funds raised just before the Great Recession.
KeywordsReal estate investment Private equity Fund performance
The authors are grateful to Burgiss for supplying the data for this study and for providing their insights into the industry. We also thank the Private Equity Research Consortium (PERC) and the UAI Foundation for support. Helpful comments were provided by Paul Mehlman, Ira Shaw, Barry Griffiths, Shaun Bond and an anonymous referee.
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