Property funds now expanding beyond continental europe into Russia, Turkey and the former soviet union states
Fund of funds are the way forward for property investors looking to diversify their portfolio and spread risk.
This was the view held by the panellists speaking at the Fund Forum in Monaco last month.
During the discussion, Patrick Sumner of Henderson Global Investors, Matthew Ryall of Merrill Lynch Investment Managers, Keith Burman of Brown Brothers Harriman (Luxembourg) and Derek Williams of Russell Investment Group, debated where the 'smart money' was going in real estate investment.
Ryall argued that when it came to real estate, fund of funds were the best option.
He said: "European fund of funds are both fantastic for the risk adverse and more opportunistic investor.
"They provide opportunities for investors to enter a number of different markets under the one fund umbrella."
Burman added: "Property funds and fund of funds are starting to expand beyond the typical countries in Europe as people's appetite for greater returns increases.
"Areas of increasing interest include Russia, Turkey and the former Soviet Union.
"Access to all these markets is now possible particularly with fund of funds. By investing in a fund, investors have access to property they may not have been able to hold directly."
He also said demand for alternative investments within a real estate portfolio including healthcare, airports and other infrastructure was also growing.
The panellists agreed property was an asset class that continued to offer solid returns despite recent market volatility and all expected this to continue as investors moved money from equities into real estate.
Ryall added: "Recent volatility in the equity market has spooked investors and led them to look at property because it provides choice and offers growth and stable high returns."
However, Sumner argued that, despite optimism in the market, many investors were still focusing on the short-term concerns, such as rising interest rates, rather than taking a long-term view.
Europe has traditionally had far fewer investors in real estate than the US and Australia, which have highly developed Real Estate Investment Trust markets.
However, more recently Europe investors have increased and he predicted more growth to come.
He added: "Although global properties securities have come down with a bump recently returns have still averaged 11%-12% ahead for the year, which is significantly higher than equities, which are only up 1%-2%.
"US volatility has disconcerted some people who believe rising interest rates are a bad idea for property.
"But these people have been focusing on the short-term outlook rather than looking at the long-end of the yield curve."
All agreed diversification was the key to smart money, particularly in growth areas such as central London, Barcelona and cities within the Nordic region.
Fund of funds offer excellent diversification for real estate investors
London and Barcelona key property hot spots
Real estate continues to offer returns of around 11%-12%
Equates to seven million people
Beware ‘sting in the tail’
Still 66% women in lower quartile
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