Private Equity Real Estate Funds Research Articles

부동산 집합투자기구의 자산 매각시점에 영향을 미치는 요인분석

This study analyzed the factors affecting the successful sale of real estate by private equity funds. In particular, it was examined through a comparison between the group in which the real estate, which is an operating property, was successfully sold and the group that was not. Previous previous studies focused on the correlation between major economic indicators and the return of real estate funds for the entire duration of real estate funds. However, this study is meaningful in that it attempted to analyze the rate of change in major economic indicators during the actual sale period. As a result of the analysis, it was significantly confirmed that the successful sale of private equity funds was a negative relationship with the level of corporate bond issuance rates, and a negative relationship with the increase in the industrial production index and the bank loan delinquency rate. On the other hand, the housing sales index in Seoul was limited, but it was confirmed that it was a positive relationship. Through this relationship analysis, collective investment businesses that operate private equity real estate funds can devise a timing of sale that can maximize sales profits. In addition, investors are expected to be meaningful to stakeholders, such as being able to use it as a decision-making indicator for the timing of the sale of property by real estate funds.

Investor Cliques and Superior Fund Performance in Less Efficient Markets: An Examination of Private Equity Real Estate Funds

Investor Cliques and Superior Fund Performance in Less Efficient Markets: An Examination of Private Equity Real Estate Funds

Private Funds for Ordinary People: Fees, Flows, and Performance

AbstractWe study private funds available to retail investors of modest wealth. Our sample covers unlisted real estate investment trusts (REITs) for superior cash flow and fee data. Fee structures are skewed toward performance-insensitive components of the compensation contract, particularly front-end loads. The average unlisted REIT underperforms the listed benchmark by 6.5% per year, 5% of which is attributable to fees. Unlisted REITs underperform institutional-grade private equity real estate funds. Fees paid to investment advisors also explain fundraising success, while past performance does not. The underperformance is consistent with the consequences of managerial conflicts of interest, inadequate governance mechanisms, opaque disclosure, and poor investment advice.

Private Equity Real Estate Fund Performance: A Comparison to REITs and Open-End Core Funds

1. Thomas R. Arnold 1. is a visiting scholar in the Warrington College of Business at the University of Florida in Gainesville, FL. (tra622{at}ufl.edu) 2. David C. Ling 1. is the McGurn Professor of Real Estate in the Warrington College of Business at the University of Florida in Gainesville, FL. (ling{at}ufl.edu) 3. Andy Naranjo 1. is the John B. Hall Professor of Finance & Chairman in the Warrington College of Business at the University of Florida in Gainesville, FL. (andy.naranjo{at}warrington.ufl.edu) <!-- --> 1. To order reprints of this article, please contact David Rowe at d.rowe{at}pageantmedia.com or 646-891-2157. We provide a comprehensive examination of the return performance of closed-end, private equity real estate (PERE) funds relative to the performance of listed real estate stocks (real estate investment trusts [REITs]) and the NCREIF ODCE fund index. We first match each PERE fund in our sample and its realized internal rate of return and equity multiple with the return that would have been earned by an LP investor on an investment in the designated benchmark over each fund’s investment horizon. Overall, we find that closed-end PERE funds have underperformed listed REITs. In contrast, we find similar overall performance between PERE and the NCREIF ODCE fund index. We also examine the determinants of the relative performance spread between the PERE funds and the equity REIT index and find that the spread widens with interest rate environment variables (Treasury yields and default spreads) and narrows with broad macroeconomic performance indicators (growth rate of GDP). Key Findings

Performance determinants of European private equity real estate funds

PurposeThe paper aims to investigate the performance determinants of European non-listed private equity real estate funds between 2001 and 2014.Design/methodology/approachUsing a sample of 363 funds collected from the Inrev database, the analysis evaluated the impact of fees and other intrinsic characteristics of these funds, such as leverage, size and duration, on the funds’ performance, intending to enhance the understanding underlying their relationship.FindingsThe findings show a negative relationship between the return of the funds and redemption fee, performance fee and management fee. Conversely, marketing fees have a positive effect on performance. When analyzing the investment style, the results reveal inhomogeneous behaviors of leverage on funds’ performance. This variable has a positive impact on the return in core funds, while there is a negative relationship in value-added investments. Finally, the emphasis on the global financial crisis shows that the effects of the independent variables on the performance do not significantly change in different economic cycles.Practical implicationsThe practical implication of the research is to understand whether an investor can direct its resources in a fund, leveraging on certain intrinsic characteristics that can be observed a priori.Originality/valueEven if there is a considerable body of literature on determinants of performance in European non-listed real estate funds, little research has analyzed the role of fees in driving their results. Besides, this paper takes advantage of observations from different investment styles to emphasize the impact of higher or lower risk profiles and from the full economic cycle to understand the effects of the crisis period.

Deciphering Private Equity Incentive Contracting and Fund Leverage Choice

I explain the standard carried interest contract as a mechanism to induce incentive compatible fund leverage while also satisfying LP return objectives. Fee, leverage and target return data from private equity real estate (PERE) funds are used to calibrate the model. Steps in the modeling process include developing a tradeoff model of fund capital structure that pits alpha against the costs of financial distress. Financial distress costs are shown to create endogenous upper bounds on fund debt levels. GPs with convex incentive fee payoff functions limit debt, even in the absence of distress costs. I also analyze how catch-up fee provisions arise endogenously to generate larger fees for high-skill fund managers.

Managerial Skill and European PERE Fund Performance

Institutional investors often select private equity real estate (PERE) funds based on the belief that some of the managers possess skill. In this paper, we study skill of PERE general partners (GPs) from two perspectives: performance persistence and limited partner (LP) reinvestment. We first risk-adjust fund returns by controlling for fund characteristics and obtain abnormal returns that are driven by managerial skill. We then use pooled OLS and probit regressions on abnormal returns to show that managerial performance persists in our sample, and that skilled managers continue to deliver winning risk-adjusted performance, while for mediocre managers performance does not persist in terms of neither performance correlation nor probability of repeating performance. We also provide evidence that LP reinvestment can serve as a signal of skill, as reinvested funds perform better than non-reinvested ones. This positive effect of reinvestment also applies to the predecessor loser and non-winner funds, suggesting that poor performance does not always indicate the lack of skill, but can be a result of random events.

Private Equity Real Estate Funds: Returns, Risk Exposures, and Persistence

Using performance data through the fourth quarter of 2017 on 467 funds that came to market between 2000 and 2013, the authors of this article first examine the unconditional performance of closed-end, private equity real estate (PERE) funds over time and across various fund characteristics. The performance metrics they use are the internal rate of return, the multiple on invested capital, and a proxy for the public market equivalent. Using conditional sorts, as well as regression procedures with asset pricing specifications, the authors estimate the exposure of PERE performance to fund-level characteristics and macroeconomic environment risk factors and find that both significantly affect PERE performance. More specifically, they find that PERE performance is positively related to fund size, gross domestic product growth changes, private market real estate returns, interest rate changes, and default spread changes and is negatively related to vintage volume. International funds dramatically underperformed relative to domestic funds during the sample period. The authors also find that fund performance is positively associated with the performance of prior funds raised by the same PERE firm. <b>TOPICS:</b>Real estate, statistical methods, risk management, private equity <b>Key Findings</b> • Fund characteristics, market risks, and macroeconomic risk factors significantly predict PERE performance. • Fund performance is positively associated with the performance of prior funds raised by the same PERE sponsor. • Fund performance is negatively associated with vintage volume.

The risk and return of private equity real estate funds

This study employs an asset pricing approach to quantify the exposure of private real estate funds to both private and publicly traded real estate risk factors. The analysis includes the creation of specific performance indices and the use of methods seeking to address some of the inherent issues with private real estate fund data, such as the high degree of serial correlation in observed total returns. The use of the Driessen et al. (2012) estimator leads to markedly higher risk factor coefficient estimates than seen in the prior literature and estimated with time series regression.

Waiting to Be Called: The Impact of Manager Discretion and Dry Powder on Private Equity Real Estate Returns

In this article, the authors investigate the performance sensitivity of private equity real estate (PERE) funds to capital deployment speeds, investment horizons, management fees, and investor opportunity costs from uncalled capital. The authors first provide a series of simulation scenarios demonstrating the significant effects of these factors on PERE performance and then use PERE fund data to empirically investigate their performance effects. Using a comprehensive dataset from Cambridge Associates covering a large sample of 497 funds sponsored by 201 managers with aggregate assets under management of $383.9 billion from 2000–2013, the authors find that capital deployment speeds vary significantly across funds and over time and that very little of this variation is incorporated in traditional performance metrics. Importantly, the dilutive effects of management fees are positively related to the time over which capital is deployed and negatively related to the percentage of net capital called from investors and deployed by the fund manager. The authors also model the significant opportunity cost investors incur when reserving funds for uncertain capital calls. This cost of maintaining dry powder for the manager is ignored in reported performance metrics. Taken together, the authors’ results show the importance of accounting for capital deployment speeds, investment horizons, management fees, and uncalled capital in determining PERE fund performance.

Fee Structures in Private Equity Real Estate

Although fees in real estate are important for investors and fund managers, they have received little attention in the finance literature. In this paper, I examine fee structures for private equity real estate funds from an investor's perspective. Fee structures, as proposed by fund managers in placing documents, are used to calibrate the total fee load. The average total fee load for closed-end funds equals 2.7%, which is substantially lower than for private equity funds. Through regression and simulation, I show that core and value-add funds charge significantly lower performance fees compared with opportunistic funds, although there is no difference in management fees. Moreover, larger funds charge significantly less management fees. Investors can substantially reduce fees by controlling the amount of leverage and avoiding commitment fees and catch-ups.

Performance persistence in real estate private equity

This study investigates performance persistence across real estate private equity funds. We apply a combination of non-parametric and parametric tests to assess the relationship between past fund performance and subsequent fund performance of non-listed real estate funds. Based on a large global sample of value-added and opportunistic real estate private equity funds raised between 1990 and 2009, we use contingency tables, cross-product ratios, rank correlation statistics and regression analyses to investigate whether there is persistence in the performance across consecutive funds. We find strong evidence for performance persistence across directly consecutive funds. However, we find little support for a relationship between the performance of other prior funds and the focal fund, suggesting that performance persistence is a short-term phenomenon.

Is real estate private equity real estate? - Dynamic interactions between real estate private equity funds, non-real estate private equity funds, and direct real estate investments

In this study, we investigate long- and short-run synchronicity of the US-focused non-core real estate private equity (REPE) fund indices in relation to direct real estate (RE) and non-real estate private equity fund (PE) indices. We test cointegration relationships between the indices and specify different vector error correction models for opportunistic and value-added REPE funds. Our results are robust to various model specifications and suggest that in the long-run risk and return of both, opportunistic and value-added REPE markets follow the direct real estate market more closely than the private equity market. Moreover, short-run opportunistic REPE returns are significantly cointegrated with the direct real estate as well as the private equity market. For value-added REPE fund returns, we find short-run interactions only with the private equity market, but not with the real estate market. Based on the risk/return characteristics, we suggest to use the term real estate private equity over private equity real estate, as value-added and opportunistic real estate funds are a lot closer related to direct real estate than to private equity.

Performance of Non-Core Private Equity Real Estate Funds:A European View

This article examines the performance of European private equity real estate (PERE) funds from 1998 to 2009 using both absolute and relative performance metrics. The authors find that PERE fund absolute returns were significantly dragged down by the financial crisis and, on average, delivered only weak absolute returns. In relative terms, they find that private equity real estate funds underperform the public real estate equities market. They also evaluate the extent of systematic valuation biases of interim fund net asset values and find some evidence of systematic undervaluation of almost 20% of the fund investments, which, when taken into account in performance evaluation, substantially improves the returns.

Performance of Non-Core Private Equity Real Estate Funds:A European View

Performance of Non-Core Private Equity Real Estate Funds:<i>A European View</i>

Performance of Non-Core Private Equity Real Estate Funds:A European View

Performance of Non-Core Private Equity Real Estate Funds:<i>A European View</i>

Class Differences in Real Estate Private Equity Fund Performance

Real estate private equity (REPE) funds are often differentiated by risk class: Core, Value-Added, or Opportunistic. Fund class is used by investors and managers to allocate funds and to describe investment policies. In this paper, we use REPE fund cash flow data from Burgiss that allow us to calculate a variety of performance metrics. For a subset of the data, we also observe characteristics of underlying fund holdings. Despite evidence that Value-Added and Opportunistic funds differ in investment composition, we show that class does not do a good job of predicting differences in performance. Unsurprisingly, greater investment in development (as assessed ex post), predicts poor performance for funds raised just before the Great Recession.

Practical Applications of The Role of Financial Leverage in the Performance of Private Equity Real Estate Funds

Leverage is the scourge of private equity real estate funds, according to the results of this detailed research on the three main investment styles: Core, value-added and opportunistic. Investors beware: Base your manager selection decisions on underlying sector and market knowledge, rather than implied skill at using and timing leverage, the authors caution. Leverage may add positive returns in the short term, but managers are not good at predicting a downturn or of reducing leverage in anticipation of a downturn, they explain. “A lot of private equity real estate managers claim to have done things well-to correctly time the market (in leverage decisions)—but, in fact, they did not,” says co-author Andrew Baum, Honorary Professor of Real Estate Investment at the University of Cambridge . The article was co-written by Jamie Alcock , Associate Professor at the University of Queensland in Australia and Lecturer at the University of Cambridge , Nicholas Colley, Senior Analyst at Property Funds Research , and Eva Steiner , PhD candidate at the University of Cambridge .

The Role of Financial Leverage in the Performance of Private Equity Real Estate Funds

The authors study a unique data set in order to examine the performance of a sample of 169 global private equity real estate investment funds across the core, value-add and opportunistic investment style categories over the most recent property cycle (2001–2011). We employ a multifactor asset pricing model to measure the impact on the funds’ total excess returns of the underlying real estate market, managerial skill measured by Jensen’s alpha, leverage and, for the first time, managerial skill as it relates to timing leverage decisions to anticipated future market trends. find evidence consistent with the hypotheses that i) fund performance is almost directly proportional to the return on the underlying real estate market, ii) there is evidence for systematic underperformance as measured by Jensen’s alpha, possibly related to market frictions, iii) leverage cannot be viewed as a long-term strategy to enhance performance, and iv) timing leverage choices to the expected future market environment does not appear to add significantly to fund excess returns. <b>TOPICS:</b>Private equity, real estate, global, manager selection

The Role of Financial Leverage in the Performance of Private Equity Real Estate Funds

We study a unique data set in order to examine the performance of a sample of 169 global private equity real estate investment funds across the core, value-add and opportunistic investment style categories over the most recent property cycle (2001-2011). We employ a multi-factor asset pricing model to measure the impact on the funds’ total excess returns of the underlying real estate market, managerial skill measured by Jensen’s alpha, leverage and, for the first time, managerial skill as it relates to timing leverage decisions to anticipated future market trends. We find evidence consistent with the hypotheses that i) fund performance is almost directly proportional to the return on the underlying real estate market, ii) there is evidence for systematic underperformance as measured by Jensen’s alpha, possibly related to market frictions, iii) leverage cannot be viewed as a long-term strategy to enhance performance, and iv) timing leverage choices to the expected future market environment does not appear to add significantly to fund excess returns.