It’s all about location, location, location—even for real estate managers’ own headquarters.
According to Preqin’s data, fund manager location could have an influence on performance, particularly for funds with older vintage years.
Generally, London-based managers performed better than their US counterparts, the report said.
Preqin found UK funds first invested between 2004 and 2006 recorded a median net internal rate of return (IRR) of around 3%, compared to just 1% for overall real estate funds.
San Francisco-based general partners (GP) even dipped into the negatives for funds with earlier vintages, falling to -3% in median net rate of return.
On the other hand, New York-based funds with the same vintage years were on par with those in London.
The spread in performance narrowed for funds that began investing from 2007 to 2009, Preqin’s data found.
During this period, London-based funds still topped the group in performance, at around 9% in median rate of return. Real estate funds managed by New York and San Francisco GPs followed closely behind, recording 7% and 6% in median rate of return, respectively.
Funds of more recent vintages—between 2010 and 2012—were neck-and-neck in performance, according to Preqin.
“As funds with later vintages are yet to fully deploy their capital or exit from their existing investments, the median net IRR of funds managed in each of these cities is likely to change over the next few years,” the report said.
New York-based real estate funds outperformed those in London and San Francisco, the data found, with a 16% median rate of return.
San Francisco-based funds’ performance jumped to about 15%, the report said, generating an 18 percentage point increase on those of vintage years from 2004 to 2006.
Median rate of return for funds based in London, however, dropped slightly to just under 15%.
Related: London versus Laos; The Big Smoke or the Big Apple?; Preqin: Foundations Drag in Real Estate Push