Performance and Market Maturity in Mutual Funds: Is Real Estate Different?

Bryan D MacGregor* (Corresponding Author), Rainer Schulz, Yuan Zhao

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)
5 Downloads (Pure)


Despite the lack of convincing evidence that active investment fund managers add value, the number of actively-managed US mutual funds has increased substantially over the last 25 years. While non-sector diversified mutual funds have received much attention, sector funds, except real estate mutual funds (REMFs), have not. In this paper, we provide new and more robust evidence on the performance of active REMFs compared to all actively managed mutual funds. We use the Carhart four-factor model with an additional liquidity factor as a riskadjusted benchmark. We use wild bootstrap methods to deal with
small samples, non-normality and heteroscedasticity, and we control
for the false discovery of significant results. For portfolios of fund types, we find evidence of both significant outperformance and underperformance, net of fees, during 1992-2016. We consider non-overlapping five-year and three-year periods and find very limited evidence of persistent outperformance. For individual funds, we find that, for both sector and diversified funds, net of fees,
only 0.79% are skilled. We find persistence in skills for only two individual fund managers of diversified funds. We investigate the effects of the outsourcing of management and of team versus individual management. Outsourcing has no effect on performance of non-RE sector funds but, for cap-based funds and style-based funds, it has a negative effect. There is some evidence that this may also be true for REMFs. Team management has no effect for any types of funds. Overall, we conclude that REMFs are generally no different from other sector funds
Original languageEnglish
Pages (from-to)437–492
Number of pages56
JournalThe Journal of Real Estate Finance and Economics
Early online date22 Aug 2020
Publication statusPublished - 1 Oct 2021

Bibliographical note

We are grateful for helpful comments from David Ling, Jeff DiBartolomeo, Scott Robertson, Martin Wersing, and seminar participants at the Humboldt-Universit¨at zu Berlin and conference participants at the American Real Estate Society annual conference in Phoenix, Arizona, 2019. Financial support from the Deutsche Forschungsgemeinschaft SFB649 is gratefully acknowledged. Finally, we would like to thank the anonymous reviewer for helpful comments that have enabled us
to strengthen the paper. The usual disclaimer applies.
Open Access via Springer Compact Agreement


  • mutual fund performance evaluation
  • false discovery rate
  • risk-factor model
  • real estate


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