M5U3 UC Davis Module 4 Unit 2 Opportunistic Funds Benchmarked Paper

How are opportunistic funds benchmarked?

In this unit, you have learned about the importance of benchmarking. When it comes to opportunistic funds, managers have high return targets, which means they often invest in risky real estate assets. It may be difficult to construct accurate series of simple holding period returns (HPRs), which are necessary for computing time-weighted returns (TWRs), for many of these assets. Opportunistic funds also often have substantial control over the timing for drawing in and paying back the investor client’s capital. Considering the nature of opportunistic funds, answer the following questions:

  • Do you think opportunistic funds can be benchmarked?
  • Which type of index could be used to benchmark opportunistic funds?

To help with formulating your opinion, refer to Section 4 in the Module 1 Unit 2 notes and Section 5 in the Module 4 Unit 2 notes.

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