commercial property funds

dylon_2

Hi
what are the pros and cons of investing in commercial property funds to provide an income in retirement.
this link caught my attention
http://money.scotsman.com/scotsman/articles/articledisplay.jsp?article_id=2805951&section=Home&prependForce=SM_
many thanks

Dylon

dunstonh

Expectation is good for this year but falling returns after that. Although they have been saying that for a while.

Issues are potential liquidity issues. If the cash in the fund is low and a not sufficient to meet withdrawals, you have to wait to get your money out. Worse case scenario is 6 months to a year delay with large amounts.

Also, it is just one asset class. No more than say 20-30% should be placed in commercial property funds and ideally it should be diversified as much as possible between fund providers to reduce the potential for one having liquidity issues. Since December its become easy to invest with 6-10 providers in one place.

Risk varies with property funds and whilst some are very low risk you also have some which are very high risk. Some focus on retail and officing and avoid manufacturing, others include it. Research is important.

Property funds can now be used in ISAs. Property funds can also be a lot cheaper with investment bonds than unit trusts. Indeed, for example, its possible to get the NU property fund with zero equivalent charges over 5 years in a bond but not even close to that in the unit trust version.