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Further Evidence on the Performance of Funds of Funds: The Case of Real Estate Mutual Funds
Author(s) -
Chiang Kevin C.H.,
Kozhevnikov Kirill,
Lee MingLong,
Wisen Craig H.
Publication year - 2008
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/j.1540-6229.2008.00206.x
Subject(s) - fund of funds , economics , global assets under management , closed end fund , real estate , commodity pool , investment (military) , empirical evidence , institutional investor , finance , real estate investment trust , passive management , contradiction , business , financial economics , monetary economics , market liquidity , corporate governance , philosophy , epistemology , politics , political science , law
Funds of funds (FOFs) are created when investment companies invest in other investment companies. Although the additional layer of fees incurred by FOFs has a negative effect on returns, there is empirical evidence that real estate FOFs generate superior performance net of fees and risk adjustments. The evidence is inconsistent with a growing consensus that most actively managed mutual funds do not, on average, generate excess returns after adjusting for fees and risk. This study explains this apparent contradiction and finds that most real estate FOFs do not outperform their benchmarks under alternative risk adjustment specifications.