With the recent news of Indiabulls delisting Dev Property Development fund from the junior stock exchange in London, and many other property funds having similar, if not worse times in the past year, there are many investors who prefer to have nothing to do with any property funds at the moment. However, there is also a growing minority who hold the opinion that because of the characteristics of property and the cyclical arena in which property markets operate, those who invest into property funds now may receive more than adequate returns in the long term.
With more than a few property funds presently at near rock bottom prices, there are a many to choose from when searching for the right prospect. It is estimated that nearly $8 billion in cash is invested in property funds, which only a few years ago was one of the most popular asset classes available due to their solid returns. However, as the global economy slowed down, according to information released by the Investment Property Databank, property fund returns have dropped dramatically by nearly 7.6% in the last quarter of 2007.
IFA Cobalt Capital representative, Andrew Montlake says, “The brave might say now is the time to go back into commercial property, as rental income will continue to come in and there is the chance to benefit from a recovery.” However it’s not as easy as choosing any of the beaten down property funds, a substantial amount of due diligence must be performed.
IFA Torquil Clark representative, Philippa Gee adds, “There are opportunities now, providing you know what you are getting into, but you need to make sure that you do not have coverage of this asset by way of another fund. For example, many cautious managed funds have allocation to this sector and you do not want to overload yourself.”
