From a small northwestern observatory…

Finance and economics generally focused on real estate

ACCRE LLC Report, Feb 2021

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February started off like gangbusters, and indeed by mid-month we’d reached record return levels. Then the air leaked out of the tires the last week of the month, leaving us disappointed. We continue to outpace the S&P and the global REIT index overall, but February did little to contribute to those numbers.

As you can see, a dollar invested in ACCRE at the inception would be worth $1.68 today (an annualized return of about 14.5%), compared to that same dollar in the S&P which would be worth $1.61. The S&P Global REIT Index has performed very well this year, climbing out of its negative return hole last year into positive territory, albeit still only at $1.22 overall for the life of our fund.

On a risk-adjusted basis, ACCRE’s Sharpe Ratio continues to best the S&P, albeit somewhat less than last month. Part of this is a very real improvement in returns to the S&P, and part is a slightly higher level of volatility for ACCRE. I would note that for the past few months, ACCRE has been nearly uncorrelated with the S&P, but in February returned to its normal correlation of about 50% (positive).

S&P 500
Average Daily Excess Return0.0424%
Standard Deviation1.3131%
Sharpes Ratio3.2322%
Average Daily Excess Return0.0451%
Standard Deviation1.1966%
Sharpes Ratio3.7693%
Overall Correlation (life of fund)52.1749%
Correlation (month of February)49.6623%
ACCRE Metrics as of February 28, 2021

Again, for the uninitiated, the Average Daily Excess Return is the daily return minus the return that would have been earned in a risk-free asset (here, the coupon-equivalent 13-week T-Bill, measured daily). The Sharpes Ratio is the ratio of those excess daily returns to the standard deviation of those returns (the measure of volatility) and serves as a proxy for risk-adjusted returns. ACCRE usually has higher excess returns and almost always has lower volatility, hence a higher risk-adjusted returns.

Best wishes to you all, and if I can answer any of your questions on REITs or real estate strategies, please drop me a line.

Written by johnkilpatrick

March 4, 2021 at 9:59 am

Posted in Uncategorized

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