Property funds / REITs

intowhere

Are these considered as risky as equities or less so? What is their purpose, in some portfolios these are listed under growth (alongside equities) and in others they are listed as defensive (alongside bonds)

MaxiRobriguez

They're both less risky and more risky at the same time. Depends on the REIT itself but I've found most of them are based on large scale office lets with limited residential. As such, in "normal" times they perform with low volatility and low growth - a bit like a bond.

However, the underlying assets are very illiquid what with them ultimately being bricks and mortar and under economic stress it might well be the case that constituents of the FTSE can re-adapt themselves much faster than a REIT would be able to.

I toyed with them a couple of years ago but ultimately came to the conclusion that there wasn't really a scenario where I would want a REIT allocation. Perhaps I would have felt differently if I was investing in 2005.

cogito

I would never invest in a Property fund because of the risk of being locked in in a downturn. They also have to hold a lot of cash (L&G have nearly 30% in cash) to meet redemptions due to the illiquid nature of bricks and mortar.

I prefer REITs as you can simply sell the shares at any time if you need to. You need to choose carefully. Retail is a basket case and if you held Intu, for example, you would have lost 75% of your money over 5 years as well as seeing the dividend slashed. I prefer well focused REITs like Primary Health Properties and Big Yellow Group for my money.

capital0ne

cogito wrote: »

I would never invest in a Property fund because of the risk of being locked in in a downturn. They also have to hold a lot of cash (L&G have nearly 30% in cash) to meet redemptions due to the illiquid nature of bricks and mortar.

I prefer REITs as you can simply sell the shares at any time if you need to. You need to choose carefully. Retail is a basket case and if you held Intu, for example, you would have lost 75% of your money over 5 years as well as seeing the dividend slashed. I prefer well focused REITs like Primary Health Properties and Big Yellow Group for my money.

Don't forget property ETF's as well and no stamp duty on ETF's