Do real estate mutual fund managers create value?

Abstract

We evaluate the skills of real estate mutual fund (REMF) managers by the value that they create. We find that compared to investing in the Vanguard REIT Index Fund, REMF managers on average produce an additional $0.5 million per month. Using bootstrap, we show that the skills of top performers are particularly evident, and the value created by them cannot be attributed to luck. REMF managers produce value by asset picking, not benchmark timing. However, net abnormal returns of REMF investors are statistically indistinguishable from zero even for top managers, so REMF managers capture all value that they create.