Performance of Non-Core Private Equity Real Estate Funds: A European View

This article examines the performance of European private equity real estate (PERE) funds from 1998 to 2009 using both absolute and relative performance metrics. The authors find that PERE fund absolute returns were significantly dragged down by the financial crisis and, on average, delivered only weak absolute returns. In relative terms, they find that private equity real estate funds underperform the public real estate equities market. They also evaluate the extent of systematic valuation biases of interim fund net asset values and find some evidence of systematic undervaluation of almost 20% of the fund investments, which, when taken into account in performance evaluation, substantially improves the returns.