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Performance of private equity real estate funds

Performance of private equity real estate funds Purpose – This paper aims to focus on the performance of private equity real estate funds. Since many institutional investors have special programs to invest with first time managers, or emerging fund managers, it also seeks further evidence on how persistent the performance of real estate funds is and how the growth in fund size affects the realised returns of a fund. Design/methodology/approach – The analyses performed are based on a large global sample of value‐added and opportunistic private real estate funds. Different model specifications are used to study the fund and sponsor‐related factors' correlation with fund performance. Findings – It is shown that the realised performance is positively correlated with fund size but negatively correlated with the sequence number of the fund supporting the fact that emerging managers are likelier to achieve good returns. The data also reveal trends in fund performance and the growth of the fund size. Evidence from private equity buy‐out funds has also shown that better performing fund managers are likely to raise follow‐on funds and often larger funds than poorly performing fund managers which is also confirmed by the findings of this paper. There is also an evidence that top‐performing funds do not grow proportionally as much as the average funds. Research limitations/implications – Actual datasets used in the regression models are often limited by exclusion of immature funds to enhance reliability of results. Originality/value – This paper expands the recent studies on private equity to private real estate, an area that has experienced substantial growth during the past ten years. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

Performance of private equity real estate funds

Journal of European Real Estate Research , Volume 3 (2): 21 – Jul 20, 2010

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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-9269
DOI
10.1108/17539261011062592
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to focus on the performance of private equity real estate funds. Since many institutional investors have special programs to invest with first time managers, or emerging fund managers, it also seeks further evidence on how persistent the performance of real estate funds is and how the growth in fund size affects the realised returns of a fund. Design/methodology/approach – The analyses performed are based on a large global sample of value‐added and opportunistic private real estate funds. Different model specifications are used to study the fund and sponsor‐related factors' correlation with fund performance. Findings – It is shown that the realised performance is positively correlated with fund size but negatively correlated with the sequence number of the fund supporting the fact that emerging managers are likelier to achieve good returns. The data also reveal trends in fund performance and the growth of the fund size. Evidence from private equity buy‐out funds has also shown that better performing fund managers are likely to raise follow‐on funds and often larger funds than poorly performing fund managers which is also confirmed by the findings of this paper. There is also an evidence that top‐performing funds do not grow proportionally as much as the average funds. Research limitations/implications – Actual datasets used in the regression models are often limited by exclusion of immature funds to enhance reliability of results. Originality/value – This paper expands the recent studies on private equity to private real estate, an area that has experienced substantial growth during the past ten years.

Journal

Journal of European Real Estate ResearchEmerald Publishing

Published: Jul 20, 2010

Keywords: Equity capital; Real estate; Property; Investments

References