European Real Estate Society - PowerPoint PPT Presentation

1 / 14
About This Presentation
Title:

European Real Estate Society

Description:

Should only incur incidental risk but this is difficult to do, ... Table 2: Return, Active Share, Tracking error, Size and Leverage: Overall period. – PowerPoint PPT presentation

Number of Views:70
Avg rating:3.0/5.0
Slides: 15
Provided by: ere46
Learn more at: http://library.eres.org
Category:

less

Transcript and Presenter's Notes

Title: European Real Estate Society


1
European Real Estate Society Annual
Conference Vienna 2013 Real Estate Fund Active
Management  by Stephen Lee  Cass Business School,
City University London and Giacomo Morri  SDA
Bocconi School of Management
2
Introduction
  • Active Management
  • Uses manager expertise
  • Different investments from benchmark
  • Expensive
  • Lacks diversification
  • Incurs incidental risk and intentional risk.
  • Problem closet index funds
  • Passive Management
  • Replicates index
  • Should be inexpensive
  • Diversified
  • Should only incur incidental risk but this is
    difficult to do, especially in real estate market
  • .

3
Two Dimensions of Active Management
  • Traditional method Alford et al (2003)
  • tracking error
  • New method Cremers and Petajisto (2009)
  • Active Share
  • Complete picture
  • tracking error and
  • Active Share

4
Two Dimensions of Active Management
5
Research Design
  • Closely follows that of Cremers and Petajisto
    (2009)
  • One benchmark portfolio
  • Property data alone
  • Hybrid measure of Active Share
  • Tracking error
  • Nine-year average Active Share
  • Compare returns

 
 
6
Fund Data
  • 38 UK real estate funds with complete return and
    market segment data all active funds
  • Period from Q42003 to Q42011
  • 18 Specialist and 20 Balanced
  • Balanced expected to be index funds
  • Specialist funds expected to be diversified
    stock pickers or concentrated stock pickers.

7
Fund Classification
8
Fund Classification
Table 1 Rank Correlation between Tracking Error
and Active Share across Sub-periods
9
Returns V Active Management
Table 2 Return, Active Share, Tracking error,
Size and Leverage Overall period
10
Returns V Active Management
Table 3 Return, Active Share, Tracking error,
Size and Leverage Sub-periods
11
Table 4 Correlation Return, Active Share,
Tracking error, Size and Leverage
12
Conclusions
  • First, the approach is able to classify real
    estate funds in the UK on their management
    activity into categories that makes intuitive
    sense and seem stable over time.
  • Second, Balanced funds show relatively low
    Active Shares and particularly low tracking
    errors, due to the benefits of property-type
    diversification.
  • Specialists funds display higher Active Shares
    and both high and low tracking errors depending
    on their stock picking approach diversified or
    concentrated.
  • In other words, the fund classification scheme
    of IPD does a respectable job in identify the
    fund types (Balanced and Specialist).

13
Conclusions
  • Next, the performance of the different
    management strategies varies with diverse market
    conditions.
  • Active funds that use a lot of leverage and
    demonstrate stock-picking ability can add value,
    especially in boom periods, whereas index funds
    which use little or no leverage show consistent
    but low returns all the time.
  • This implies that investors need to constantly
    monitor changes in the market and switch between
    fund management styles, if at all possible.

14
European Real Estate Society Annual
Conference Vienna 2013 Real Estate Fund Active
Management Any Questions?
Write a Comment
User Comments (0)
About PowerShow.com