Offshore Capitalist

Active versus Passive in European Property

A fund mentioned on Offshore Capitalist recently is the Insinger de Beaufort Real Estate Equity Fund which invests in the shares of European REITs and real estate companies.

The objective of the fund is to generate superior risk-adjusted returns, by reducing the volatility and protecting the downside using shorts and derivatives.  In other words, it’s not a straightforward long equity fund, but uses hedging to reduce risk.

How does this active management affect performance when compared with the passive index?  Well, referenced against the iShares ETF as a proxy for the index (incidently the ETF has performed rather better than the index it is supposedly tracking in the last year), we can see the following:

  • 3-year standard deviation: ETF = 33.55% , FUND = 22.28%
  • 3-year average returns: ETF = 7.68%, FUND = 15.72%

In other words, for about one-third less volatility than the index, the Insinger property fund has delivered twice the average returns.

idb_property_risk

ishares_eur_property_risk

Click to: Read more about the risk measure definitions.

via A European multi-manager real estate fund.

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