A fundamental part of portfolio construction in real estate investment is to determine whether to invest in a selection of specialist funds or a handful of generalist funds, or even a combination of both. However, does specialisation lead to improved investment performance? That is the question that this research attempts to answer. For the purposes of the study, a specialist fund is defined as a fund with a strategy to invest in a single country and a single sector, whereby a generalist fund is one with a strategy to invest across multi countries and multi sectors.
Fund selection is a fundamental part of portfolio construction. The question that is often posed is whether to invest in a selection of specialist funds or a handful of generalist funds, or a combination of both. However, does specialisation lead to improved investment performance?
The findings from our latest research showed that:
- Specialist funds outperformed generalist funds on average over the 2001 to 2017, but not consistently over the 15 year period
- Multi sector, multi country funds have grown in numbers and market share over the period
- Higher leverage has been associated with weaker performance over the past 15 years
The analysis was based on the annual performance of 445 European non-listed real estate funds over the period of 2001 to 2017.
The full report is available to members at inrev.org/research