Abstract
Performance measurement for private equity real estate is quite different from that for public equity. One noticeable difference is how values and return performance are calculated and compared across assets. One of the many reasons for creating the NCREIF property index was to help private equity real estate investors produce accurate return attribution. In <b><i>Portfolio Upside and Downside Risk—Both Matter!</i></b>, from the 2021 special real estate issue of <b><i>The Journal of Portfolio Management</i></b>, authors <b>Jeffrey Fisher</b> (<b>Indiana University Kelley School of Business</b>) and <b>Joseph D’Alessandro</b> (<b>National Council of Real Estate Investment Fiduciaries</b>) contend that “traditional performance measures do not distinguish between upside risk and downside risk. Downside risk is based on returns that are below a target rate, below zero, below average, or below a benchmark and vice versa for upside risk.” Fisher and D’Alessandro also admit that academic literature contains research on the analysis of public market securities that introduces the differences between upside and downside risk measures. However, these have yet to be applied to private equity real estate research. Their article helps remedy the situation by employing downside risk measures and applying them to different property sectors and geographical areas within the NCREIF Property Index (NPI).
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