Publications

- October 1, 2011: Vol. 3, Number 9

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Synthetic Benchmarks: Investors Should Consider A Synthetic Approach to Benchmarking Real Estate Funds in Asia

by Dr. Kevin Swaddle

The benchmarking of unlisted real estate funds is rarely straightforward and is frequently a bone of contention between general partners and their investors. What represents a fair comparison of the manager’s fund-level performance? Should it be the NAV return on all the alternative investment funds into which the investors might have put their money or just the return on funds that look very similar to the one being compared, on the basis that the investors’ selection of funds make them to some extent complicit in the result?

A robust peer group benchmark is a good way to go, but this is often not possible. The main issue is the heterogeneity of funds. Even in Europe, where there are a great many funds, and where you might assume it would be easy to carve out a relevant peer group comparator, it has sometimes been difficult for organizations such as Investment Property Databank (IPD) and the European Association for Investors in Non-listed Real Estate Vehicle

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