In summary, the impact of leverage – especially in the 2008-9 period – was so punitive that the return delivered by any good work being done by managers was likely to have been obliterated. This affected opportunity funds in particular, despite some evidence of highly positive alphas being achieved by a group of opportunity fund managers and (with the leverage impact corrected for) across the value-added sample. Results for the core funds sample were more encouraging than reported in the first study with a market beta of close to 1, indicating that the property risk is similar to that of the benchmark, and a lower tracking error of around 1.5-2%. However, core funds on average under-performed the market by - 0.72% p.a. (negative alpha), which can be partly explained by the impact of leverage. It is a concern that core funds underperformed the benchmark during each of the past three years.
Source : ULI