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Performance drivers of private real estate funds

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  • Kieran Farrelly
  • Simon Stevenson

Abstract

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.

Suggested Citation

  • Kieran Farrelly & Simon Stevenson, 2016. "Performance drivers of private real estate funds," Journal of Property Research, Taylor & Francis Journals, vol. 33(3), pages 214-235, July.
    • Handle: RePEc:taf:jpropr:v:33:y:2016:i:3:p:214-235
    DOI: 10.1080/09599916.2016.1210333
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    References listed on IDEAS

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    1. David Ling & Gianluca Marcato & Pat McAllister, 2009. "Dynamics of Asset Prices and Transaction Activity in Illiquid Markets: the Case of Private Commercial Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 359-383, October.
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    Cited by:

    1. Maiia Sleptcova & Heidi Falkenbach, 2021. "Managerial Skill and European PERE Fund Performance," The Journal of Real Estate Finance and Economics, Springer, vol. 62(4), pages 665-690, May.
    2. Fuerst, Franz & Mansley, Nick & Wang, Zilong, 2021. "Do specialist funds outperform? Evidence from European non-listed real estate funds," Research in International Business and Finance, Elsevier, vol. 58(C).
    3. Avis Devine & Andrew Sanderford & Chongyu Wang, 2024. "Sustainability and Private Equity Real Estate Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 161-187, February.
    4. Graeme Newell, 2021. "Future research opportunities for Asian real estate," International Journal of Urban Sciences, Taylor & Francis Journals, vol. 25(2), pages 272-290, April.

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