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Paper eres2012_386:
Measuring the risk of unlisted property funds - A forward looking analysis

id eres2012_386
authors Kieran Farrelly
year 2012
title Measuring the risk of unlisted property funds - A forward looking analysis
source 19th Annual European Real Estate Society Conference in Edinburgh, Scotland
summary This study sets out a practical methodology for assessing and measuring the risk of unlisted property funds on a forward looking basis. Renewed investor interest, particularly cross-border, in property as an asset class had led to tremendous growth in the size and importance of the indirect property investment market. Having emerged during the early part of the century, unlisted property funds are now a widely used institutional investor conduit for property investment. However, despite increasing research interest into the performance of these vehicles, the estimation of their risk-return characteristics remains scant, in part due to the paucity of available data. To overcome these data limitations, this study makes use of a monte carlo simulation framework to generate unlisted property fundsí returns on a forward looking basis. This accounts for the uncertainly of the key stochastic driver themselves, their interdependency, and model uncertainty. To estimate the risk-return trade-offs of unlisted property fund strategies the study makes use of measures which explicitly account for the asymmetric properties of unlisted property fund returns. These are a composition of direct property returns (well know to be non-normal), the impact of financial leverage, any tax incidence, and fund fees. The study pays particular attention to the impact of financial leverage and the increasing degree of return asymmetry that it creates. It contributes to the existing literature by employing measures which are not based upon the first two statistical moments and has pertinence given the current regulatory environment.
series ERES:conference
type normal paper
content file.pdf (592,290 bytes)
discussion No discussions. Post discussion ...
ratings
session Parallel Session A4
last changed 2012/11/15 10:28
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