Closed End Real Estate Funds and Real Estate Portfolio Management: Evidence from the Italian Retail Market

Closed-end real estate funds (REMFs) are indirect real estate investment vehicles, traded in markets worldwide, that are considered an alternative to real estate investment trusts for indirect investments in the real estate market. REMFs are subject to a fixed time constraint that managers must consider in their portfolio management strategy to be able to refund quota holders by the expiration date. This additional constraint is a unique feature of the REMF industry in some European markets. We evaluate active management policy for a real estate portfolio of a sample of REMFs with respect to the expiration date of the financial instrument, and measure the impact of active management on the performance of real estate investment vehicles. We show that the time constraint affects the active management policy and that more active REMFs are usually positively evaluated by the market, especially when they can sell assets before the expiration date.