Riets

chesky369

One of the Trustees of our pension fund is tremendously keen on investing in property through Riets. I've noticed a complete lack of enthusiasm from our investment advisers which he is doing his best to ignore. Why would they be so luke-warm? Is it because it's new-ish and they aren't themselves overly familiar with it - or might there be some other reason.

dunstonh

Why would they be so luke-warm?

20% down this year could be a good reason they have concerns. Would the pension scheme members be interested in their pension scheme investing in high risk funds like that? Maybe a small part of the specialist sector allocation but nothing else.

Is the scheme over funded at the moment? Can it afford to invest in high risk areas like REITs?

chesky369

Thanks Dunstonh for this, I had a horrible feeling it would be something of the sort. Why would a normally sensible bloke want to go out on a limb like this - he's been going on about them for about 18 months, I think even before they'd been issued. I need to gen up a bit on them - any comparitive tables around?

EdInvestor

Most REITs are listed property companies such as Land Securities, Hammerson, British Land.

It is of course much cheaper to buy listed shares directly than to buy funds (no investment management charge for a start )

.Successful investors would regard a biggish fall in the share price as a good time to buy in, as the share is cheap.It's only mug punters who buy high and sell low.

Five year chart for 2 REITS]

As you can see, demand in advance of the REIT change pushed up the value of the shares. Then the commerical property market started to cool quite rapidly,so prices fell.It's possible they are now back to the sort of level that people will see as offering value, and thus start buying again.

There is no need to use funds to buy REITS, much cheaper to buy directly as mentioned :)Your co-trustee might also be interested in the offshore property investment trusts run by the big insurers which you can also buy direct.

dunstonh

Take a look at some of the unit trust property funds such as Fidelity Global Property, Aberdeen Property share, Premier Pan European Property share. They are unit trusts but they invest into reits.

REITs were heavily hyped but have fallen flat on their face. Sub prime concerns and rising interest rates havent helped one bit. Like anything that drops in value, there could be value in some of them now but unlike personal money where you may have a higher risk profile and can afford to take risks, I doubt an occupational pension scheme can afford to do that.

Does he realise the requirements and responsibilities trustees have in making investment decisions? Pushing the reits option is not responsible unless he is is doing it as part of the overall portfolio. There has been a push to get trustees to use sector or asset allocation for occupational pensions. REITs would form part of the specialist sector allocation which is typically around 5% of the portfolio. So having a few percent is no harm.

EdInvestor

If there are any "duty of care" risk type issues abo9ut investing directly into REITs, then the ITs may be a better bet.

IT list


These funds have lower charges and a better divi yield than u/ts.Although listed they are also mainly invested in bricks and mortar, so are likely to be less volatile than either REITS or unit trusts invested in property shares and REITS.

chesky369

Dunstonh - you more or less said what I was going to reply to EdInvestor (only of course much more clearly); if it were my money I might think about having a go (if I were feeling rich) but it's a bit different with our members' pension contributions I feel.

EdInvestor

dunstonh wrote: »

Pushing the reits option is not responsible unless he is is doing it as part of the overall portfolio. There has been a push to get trustees to use sector or asset allocation for occupational pensions. REITs would form part of the specialist sector allocation which is typically around 5% of the portfolio.

I do hope it was unsuccessful: the current IMA sector split is quite ludicrous and needs a complete overhaul, especially where property funds are concerned.The Trustnet arrangement is much more sensible.