Property investment funds

Until the banking issues and recession changed our economic outlook in 2007, the performance of property as an asset class had been robust, supported by low interest rates and the limited supply of land as well as a supportive environment. Combined with the nervousness generated by the falling share prices of 2000-2003, and again during 2008/09, these factors led to renewed focus on property as an investment for individuals as well as big corporations.

It is certain that property, like any other volatile asset, should only be considered as a long-term investment and buildings are far less liquid than stocks and shares, ie: the money being invested or looking to be withdrawn can be subject to a lengthy buy and sell process. However, it can offer certain investors real benefits within a diverse portfolio, so if you believe it is suitable for you, exposure to the market can be achieved in a number of different ways.

For the most sophisticated and wealthy investors, there is the option to invest directly in buy-to-let or commercial property (eg: offices or retail). For the average investor, however, the capital commitment and the specialist knowledge required, particularly for commercial property, are beyond their means. For much smaller lump sums, therefore, a different route might be necessary.

Option one is to buy the shares of property companies. These allow you to invest in a developer’s business and therefore gain exposure to their range of projects. This is just one step away from direct investment, but is more liquid and usually cheaper to access. However, property shares are equities and, just like the shares of Vodafone or BP, are influenced not just by property's prospects but also by wider market sentiment. Hence, the value of your investment will be volatile – much more volatile than investing in bricks and mortar direct.

Another option therefore, might be to consider a unit trust or life fund. Both offer access to a range of different investment options and their size means they buy not just one building project but many, providing diversification benefits for even a small sum.

The range of funds available is also varied - some invest 100% in bricks and mortar, while some include an exposure to property shares; some hold only UK property, while others venture overseas. Whatever your requirements, therefore, one of these options is likely to meet your needs. This does not, however, detract for the fact that property is a specialist area and professional advice should always be sought before you make a decision.

We currently reccomend the SWIP - Property trust in both our cautious and balanced portfolios.



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