Performance Persistence: Evidence from Non-Listed Real Estate Funds

This study applies a combination of non-parametric and parametric tests to assess the relationship between past fund performance and subsequent fund performance of non-listed real estate funds. Using a large global sample of net IRR returns delivered by value-added and opportunistic real estate private equity funds between 1990 and 2009, we use contingency tables, cross-product ratios, rank correlation statistics, and regression analyses to find out whether there is a persistence in the performance across consecutive funds. We find strong evidence for performance persistence between directly consecutive funds. However, we find no support for a relationship between the performance of other prior funds and the subsequent fund, suggesting that performance persistence may be a short-term phenomenon. Results indicate that in the longer run there may in fact be a reversal of performance across funds of the same fund manager.