Geographic diversification, proximity bias and performance of Swiss real estate funds

Purpose This article investigates the link between the diversification strategies of Swiss real estate fund portfolios and their financial performance. Design/methodology/approach Together with the Geneva-based company Conser ESG Verifier, we collected data on 41 listed Real Estate funds and their portfolios, comprising more than 9’000 buildings. We defined spatial metrics, such as distance to headquarters, geographic diversification and linguistic proximity at the building level and aggregated these measures to the fund level. Finally, we applied cross-sectional regressions and categorical and spatial similarity analyses to highlight the differences between funds. Findings On average, listed Swiss real estate funds tend to hold geographically concentrated property portfolios, with properties close to the fund’s headquarters and predominately in locations where the language aligns with that of the headquarters. Regression results suggest that while funds tend to diversify more as their asset base grows, geographic diversification and the propensity to invest locally do not significantly affect fund returns. Fund returns do, however, tend to increase with fund age and the number of buildings held. Additionally, similarity analysis indicates that Swiss real estate funds are distinct in terms of building types and the spatial distribution of their investments. Practical implications This dataset enhances the transparency and comparability of Swiss real estate funds, facilitating future research. Originality/value This paper introduces a novel dataset on listed Swiss real estate funds and their portfolio holdings. It demonstrates the link between property characteristics, geographic and linguistic factors and financial performance.