||Why do property values melt when funds go into liquidation
||German open-ended retail funds have shown an internationally unique smooth performance over the last five decades. In recent times however, some funds have yielded very negative returns, which is in sharp contrast to the general market development. Especially funds that were forced to liquidate performed worst. The paper compares the performance of those funds under liquidation to funds with similar investment strategies that continue their business. The analysis starts from fund performance after financing, liquidity holdings and fees. In a second step, property performance is analyzed on country level, and finally single asset performance is taken into account. As all information is retrieved from publicly available sources, value changes of single assets between 2006 and 2010 can be analyzed without any confidentiality limitations. Since German open-ended funds have two thirds of their assets invested outside of Germany in 28 major real markets, findings are interesting for the comparison of German versus international valuation practice. Results show that fund liquidation has a strong negative impact on appraised property values. Evidence is presented that property values have been overstated in the years before the liquidation.
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||openended property funds, commingled real estate funds, real estate appraisal
Glaesner, Sebastian (2011).
Why do property values melt when funds go into liquidation. 18th Annual European Real Estate Society Conference in Eindhoven, the Netherlands,