Fund Manager Performance: How Persistent Is The Performance Of Uk Real Estate Fund Managers?

This paper examines whether or not there is persistence in the performance of UK property funds. Such analysis of persistent performance is undertaken on returns relative to a benchmark and also on a risk-adjusted basis (i.e. ìalphaî). The aim is to establish whether or not property is characterised by fund managers who can systematically add to (or detract from) performance on account of ìskillî. The performance horizons looked at are sets of successive three, five and ten year periods from 1982 onwards, drawing on the Investment Property Databankís (IPD) full set of UK fund data. Such medium and long term horizons are most relevant for property, given they correspond to the periods by which property performance is typically judged and also because of propertyís illiquidity and high cost of transacting. Overall, the statistical evidence on the existence of systematic outperformance and alpha is not compelling. Before adjusting for risk, the strongest evidence of general persistence is over three year horizons, less so over five and ten years. There is, however, a suggestion of performance persistence amongst the very best (i.e. top decile) funds. On a risk-adjusted basis, there is evidence of general performance persistence over ten year horizons, including amongst top decile funds. The evidence is more tentative over five year horizons (analysis of 3 year horizons was not possible on a risk-adjusted basis). The overall conclusion is that the generation of systematic out-performance and alpha in UK property is limited to a small elite of top performers.