Real estate funds reap huge returns
Further evidence that property is back in favour among investors has emerged in the latest ranking of investment fund returns.
Data from funds monitor Morningstar shows that funds invested in European real estate equities generated the second-highest return of the 128 sector categories it monitors, while global property funds ranked sixth in the top-10 return list.
Morningstar's figures for the period to September 14 show that funds with a mandate to invest in European equities exposed to property were on a three-month return of 29.22 per cent, beaten only by a 36.76 per cent return achieved by funds invested in Turkey equities.
Global real estate funds ranked 6th with a three-month return of 20.76 per cent. Among the offshore property-related investment funds that are now responding to Asian demand for London property is the Prime London Capital Fund, which will visit Hong Kong and Singapore next month to make a presentation to investors.
The open-ended fund provides investors with exposure to prime London residential property for a minimum investment of ?1,000 (HK$12,815). It has eight properties, each valued between ?500,000 and ?2 million.
The fund's selective asset portfolio provided a cushion to the big falls in the market and unit prices dropped only 10 per cent from peak levels in January last year to the present, against a fall of 25 per cent in the benchmark index for prime central London property compiled by consultancy Savills.
Although property funds may allow investors to participate in overseas property market at lower entrance fee than buying their own apartments, analysts warn that management fees and other hidden expenses may erode gains.
'I will never invest in these kinds of investment products as the property is then not under my control and the management company will take a good sum of money as a management fee,' said Patrick Koo (left), a veteran investor. Fees must be paid in good times as well as bad, he added.
