While some institutions may at least temporarily shy away from new closed-end fund investments, the closed-end model is far from dead. Advisers aiming to raise new funds, however, will need to restructure their vehicles to better accommodate limited partner interests. They also need to explore how to minimize conflicts among fund investors.
During the bull market of 2002 to 2007, investors and managers supported the creation of a number of large, open-end, value-added funds. The attractiveness of this format lay in its ability to provide investors with a platform for achieving higher returns while also providing the opportunity for liquidity.
After three years of dismal returns and a near-death experience in early 2009, REITs ended the year on solid ground. For all of 2009, REITs on the FTSE NAREIT Equity REIT Index gained 28 percent, making a comeback after losing nearly 38 percent in 2008.
The real estate and financial market crashes of 2007 are the most recent empirical proof that imperfectly competitive markets do not trend toward equilibrium transactions of price and quantity. As businessman and currency speculator George Soros has pointed out frequently, “financial markets have a tendency to develop bubbles.” Real estate markets, too, will tend to overshoot and then undershoot equilibriums of price and sales volume.
One of my favorite movies of all time is an old British comedy, Bedazzled. The plot of the movie involves the age-old story of a young man (played by Dudley Moore) who sells his soul to the Devil (played by Peter Cooke) in exchange for 10 wishes.