Global Real Estate Mutual Funds: Managerial Skills and Diversification Benefits?

Bryan MacGregor, Rainer Schulz, Yuan Zhao

Research output: Working paper

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This paper examines the performance and the diversification benefits of
U.S.-registered, active, global real estate mutual funds (GREMFs). It considers both the industry as a whole and 76 individual funds, relative to a global
and to a domestic benchmark, and before and net of expenses. We estimate
alpha, the conditional outperformance, and use the cross-sectional wild bootstrap method to separate funds with genuine skills from merely lucky ones. We find that the actively-managed GREMF industry, as a whole, displays no skills
to beat either the global or the domestic benchmarks, even before deduction
of expenses. The latter result suggests that there is no benefit from international real estate investment. We also undertake recursive estimates of alpha
and conclude that, after an initial period when there were fewer than five funds,
there has been no evidence of skills. At the individual fund level, against the
global benchmark, we find only one skilled fund but only before expenses are
deducted; and, against the domestic benchmark, we find one after the deduction
of expenses. Against both benchmarks, we find a number of funds which display a significant lack of skills rather than bad luck, particularly once expenses
are taken into account. We undertake a series of robustness checks, including
using different benchmarks, and conclude that our results are robust. We also
explore possible explanations of performance and conclude that it is linked to
over-weighting portfolios in countries/regions with higher economic growth and
better investor protection.
Original languageEnglish
Place of PublicationAberdeen
PublisherUniversity of Aberdeen: Business School
Number of pages37
Publication statusPublished - 1 Apr 2019


  • performance
  • diversificiation
  • wild bootstrap
  • global investment


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