Abstract/Summary

Despite the growth seen in the private real estate fund market, there remains a paucity of academic work on their performance drivers and risk characteristics. This study empirically examines the characteristics and drivers who influence the performance and investment activity of private real estate funds. A detailed sample of US-focused closed-ended Value add and Opportunity funds is used to do this. Both absolute and relative performance measures are used, including the public market equivalent measure. This is more widely used in the private equity studies but to date has been little used in real estate work. The analysis showed that there was generally little statistical significance observed for fund characteristics being drivers of fund performance. Fund size was found to have limited influence upon subsequent performance and sector specialisation was only accretive for outperforming funds. Total vintage year capital flows negatively impacted performance irrespective of measure used. Fund investment activity, as measured by observed cash flows, was found to be pro-cyclical with the results being most significant for distributions.