“There’s nothing you can do in the interest of being above average that does not expose you to the risk of being below average."
Pension funds and other institutional investors constantly search for the right fiduciary partners to trust with their money. This selection process can be robust and unbiased or lax or even motivated by political priorities. What’s surprising is how different the outcomes are for real estate fund managers vs. managers in other private equity strategies. Real estate fund managers often keep raising capital even after stark relative and absolute underperformance. Recent research helps explain why, and the surprising “benefit” real estate fund investments may provide to their LP backers.1
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