Real Estate Returns by Strategy: Have Value‐Added and Opportunistic Funds Pulled Their Weight?

46 Pages Posted: 4 Jun 2020

See all articles by Joseph L. Pagliari

Joseph L. Pagliari

University of Chicago - Booth School of Business

Date Written: Spring 2020

Abstract

Real estate strategies broadly fall into three categories: core, value‐added and opportunistic. This empirical examination of net returns from these three strategies indicates that, on a risk‐adjusted basis, the value‐added funds have strongly underperformed and the returns from opportunistic funds have weakly underperformed the returns available from core funds. In so concluding, this article departs from standard asset‐pricing models in two important respects: the total risk is used and the cost of borrowing increases as leverage increases. While the first departure has no substantive effect, the second departure lowers the estimate of the underperformance of noncore funds.

Suggested Citation

Pagliari, Joseph L., Real Estate Returns by Strategy: Have Value‐Added and Opportunistic Funds Pulled Their Weight? (Spring 2020). Real Estate Economics, Vol. 48, Issue 1, pp. 89-134, 2020, Available at SSRN: https://ssrn.com/abstract=3617154 or http://dx.doi.org/10.1111/1540-6229.12190

Joseph L. Pagliari (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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