Real estate opportunity funds : past fund performance as an indicator of subsequent fund performance

Abstract

The returns of opportunistic real estate private equity investment funds were tested for evidence of performance persistence between subsequent funds by the same manager. Tests include regression analysis, construction of contingency tables, and calculation of rank correlation coefficients. Tests were based on return data from the period 1991 to 2001 and were similar to those used to analyze performance persistence in other investment vehicles such as mutual funds and hedge funds. Results indicate that manager performance in a given fund is a significant indicator of performance in subsequent funds, but that this persistence accounts for only a limited portion of fund return Gross fund returns exhibit a higher degree of serial correlation than net returns. Other fund characteristics, analyzed in conjunction with previous fund performance, are not shown to be significant indicators of performance.