Some Additional Evidence on the Performance of Commingled Real Estate Investment Funds: 1972-1991

This paper examines the investment performance of two commingled real estate investment funds (CREFs) over the past twenty years. Results indicate that these funds: (1) offered very good portfolio diversification potential by reducing risk and increasing return; and (2) provided a good hedge against (anticipated) inflation over the entire period of study. Risk-adjusted performance for these CREFs generally remained superior to stock and bond performance because of the lower volatility in CREF returns. While CREFs provided a significant hedge against inflation during the 1972-1991 period, this hedge was significantly diminished during the 1984-1991 period, a period when the rate of inflation was relatively low.