Real estate mutual funds in Spain. Performance and persistence

Abstract

The purpose of the present paper is to study the performance and persistence of the returns of the spanish real estate mutual funds universe from the beginning of their activity, late 1994 until august 2012. We adopt the Jensen's alpha model, Sharpe's ratio and Carhart's (1997) methodology. In terms of efficiency, Sharpe's ratio shows negative values in the first three years of activity of each fund and very low or even negative values in the last three or four years. Jensen's indicator shows that the overall funds have underperformed the market, which has been approximated by the housing profitability and a half of the profitability of all real estate funds. Benchmarks portfolios that reflect the behavior of the bond or equity markets, did not turn out to be significant variables. There is evidence of persistence for one, two, three and four years, for the universe of funds. The evidence obtained in our work for the real estate funds in Spain, efficiency lower than that of the market and persistence in performance, allows us to confirm the difficult situation that has gone through and which continues to suffer this type of collective investment, highlighting the need and the urgency of driving measures to boost their activity.