Return Profile of Opportunistic and Value Added Private Real Estate Funds – November 2015

by Lisa Parker

  • 19 Nov 2015
  • RE

Preqin’s Real Estate Online service features full net-to-LP performance data for 1,400 named private real estate funds. As illustrated in the below chart, the standard deviation of the median net IRR is generally higher for value added funds across most examined vintages. 2007, 2010 and 2011 are the only vintage years where the standard deviation is lower for value added vehicles.

The median net IRRs are positive for both opportunistic and value added strategies across all vintage years examined. Funds of vintage year 2006 would have invested the majority of their capital at peak prices, and as a result, have the lowest median net IRRs for both value added and opportunistic vehicles. 

Value added and opportunistic funds are both high risk, high returning strategies, although opportunistic funds are generally the furthest along the risk-return spectrum. Preqin’s data shows that when using standard deviation of median net IRR as a measure of risk, it is in fact value added funds that have a larger deviation from the median, though these results vary when examining each vintage year.

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