Do Alternative Real Estate Investment Vehicles Add Value to REITs? Evidence from German Open-ended Property Funds

Do Alternative Real Estate Investment Vehicles Add Value to REITs? Evidence from German... Besides the more commonly used REITs, German investors can also invest in a lesser-known real estate vehicle, Open-ended Property Funds. OPFs are considered a compromise between listed and direct real estate investments. OPF fund managers generally provide daily (perfect) liquidity. However, if liquidity falls below 5%, share redemptions in these funds can be temporarily suspended for a period of up to two years. During this time, investors will only be able to sell shares on the secondary market (exchange), and are thus subject to significant liquidity risk. The objective of this paper is to analyze whether OPFs add value to investor portfolios above that provided by REITs. We show that OPFs have a diversification advantage over REITs in low-risk portfolios, despite their larger potential liquidity risk. REIT liquidity is comparable to that of ordinary common stock, but OPFs exhibit an average initial discount to funds’ NAV of about 6% when share redemptions are temporarily suspended. However, in the long-run, this potential redemption suspension does not negatively influence OPF performance (in case OPFs reopen again). This makes OPFs an attractive investment alternative to REITs for investors who have a high level of risk aversion and a long-term investment horizon, such as endowments, insurance companies, and pension funds. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Do Alternative Real Estate Investment Vehicles Add Value to REITs? Evidence from German Open-ended Property Funds

Loading next page...
 
/lp/springer_journal/do-alternative-real-estate-investment-vehicles-add-value-to-reits-v0yUYIKBmH
Publisher
Springer US
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-011-9342-z
Publisher site
See Article on Publisher Site

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches

$49/month

Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.

$588

$360/year

billed annually
Start Free Trial

14-day Free Trial