Differentiating Cref Performance

37 Pages Posted: 20 Nov 2006

See all articles by John G. Gallo

John G. Gallo

University of Texas at Arlington - Department of Finance and Real Estate

Larry J. Lockwood

Texas Christian University

Mauricio Rodriguez

Texas Christian University

Abstract

We examine factors underlying the differences in commingled real estate fund (CREF) performance using a sample of 65 CREFs during 1985-2002. More than half of the individual CREFs underperformed the employed benchmark. However, portfolios of CREFs performed well in both up and down markets, smaller CREFs outperformed larger CREFs, and top performing CREFs continued to outperform. Differential CREF performance appears to be attributable to property selection, rather than allocation across real estate sectors. Liquidity-constrained CREFs exhibited lower risk. CREFs with large benchmark tracking error experienced inferior performance. These findings indicate important cross-sectional differences among CREFs and diversification opportunities for pensions employing multiple CREF investment strategies.

Suggested Citation

Gallo, John G. and Lockwood, Larry J. and Rodriguez, Mauricio, Differentiating Cref Performance. Real Estate Economics, Vol. 34, No. 2, pp. 173-209, Summer 2006, Available at SSRN: https://ssrn.com/abstract=945534 or http://dx.doi.org/10.1111/j.1540-6229.2006.00164.x

John G. Gallo (Contact Author)

University of Texas at Arlington - Department of Finance and Real Estate ( email )

Box 19449 UTA
Arlington, TX 76019
United States

Larry J. Lockwood

Texas Christian University ( email )

Fort Worth, TX 76129
United States
817-921-7420 (Phone)
817-921-7227 (Fax)

Mauricio Rodriguez

Texas Christian University ( email )

P.O. Box 298530
Fort Worth, TX 76129
United States
817-921-7514 (Phone)
817-921-7227 (Fax)

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