Investment Style and Performance in The Global Real Estate Mutual Fund Market

This paper investigates the performance of 402 real estate mutual funds worldwide during the period from March 1997 through April 2007. With the exception of funds targeting Asia, these funds generally adhere to their stated investment mandate, while global funds are mostly invested in the United States and the United Kingdom. Between 72 percent and 92 percent of the performance of these funds can be attributed to investment style. Grouped per region, real estate mutual funds exhibit excess returns that are significantly different from their global and regional benchmarks. Most notable, investment managers of North American and Australian real estate mutual funds have negative risk-adjusted returns, whereas investment managers of Asian, European and global funds are able to create value for investors. Acknowledgements We thank AME Capital and APREA for providing parts of the database. Eichholtz and Kok thank the Real Estate Research Institute for financial support. David Ling and Mark Roberts are thanked for their helpful comments. All remaining errors pertain to the authors. Please send all correspondence to Nils Kok at [email protected], Maastricht University, PO Box 616, 6200 MD Maastricht, The Netherlands. p: +31(0)43 3883838.