Investing in Global Real Estate Fund of Funds (FoF)

Equity Fund

In this article you will read about

  • Understanding Global Real Estate FoF
  • Investing in Global Real Estate FoF
  • Why consider Global Real estate FoF

Investing in Global Real Estate Fund of Funds (FoF)
Understanding Global Real estate FoF and including them in your portfolio for diversification besides potential income and capital appreciation

There is something about physical real estate as an asset class that draws scores of Indians. Buying land, residential or commercial property traditionally has been a preferred choice for most Indians. The tangible nature of real estate makes it a preferred choice among investors, real estate is considered to be hedge against inflation. Asset allocation is the bedrock of risk management and optimal portfolio returns. The typical asset classes viz equity, debt and cash can be supplemented by real estate, making it possible for optimum overall portfolio diversification. Yet, for lot of investors, exposure to real estate in their portfolio is traditionally limited to stocks of companies that are involved in the real estate development, or through owing physical real estate themselves. A globally diversified fund of funds focused on investing in real estate predominantly via Real Estate Investment Trusts (REITs) and real estate securities, provide unique opportunity for Indian investors to take exposure to real estate as an asset class.

What are Global Real Estate FoF?

Global Real Estate FoF invests into real estate opportunities all around the world. The portfolio is typically invested into, income-producing real estate. The underlying portfolio may be invested across various REITs and real estate securities. Structurally, REIT is a company that owns and operates income-producing real estate or related assets, which may include office buildings, shopping malls, apartments, hotels, resorts, warehouses, and even mortgages or loans. Global real estate FoF provide exposure beyond traditional real estate sectors for e.g exposure to REITs focussed on investing in Data Centres, Warehousing and Cold Storage, etc.

Unlike other real estate companies, typically REIT does not develop real estate properties to resell them. Instead, a REIT own pre-developed properties primarily to operate them as part of its own investment portfolio and seek rental income on the same.

Global Real estate Fund of Funds looks to invest across geographies such as the US, European, and Asia Pacific real estate markets among other regions, to find potential opportunities around the world. There is further variety in the way they have exposure to asset classes within real estate to include traditional real estate options and beyond the usual commercial or residential real estate formats. The objective though remains income generation and possible capital appreciation.

Why consider Global Real estate FoF?

Global Real Estate FoF offer investors an opportunity to earn income and returns through investments in the real estate sector. The benefits that global real estate FoF offers is affordability, accessibility, diversification and professional management.

Investors face less hassle by way of transactions and taxes when it comes to handling real estate on their own, especially when investing outside India. At the same time, REITs offer investors with the opportunity to buy real estate as a financial security, and take exposure to this asset class to diversify portfolio risk. Structurally, REITs invest in real estate with income earning potential and based on the fund’s objective, most of them distribute the income among investors of the REITs, making it a good choice for investors seeking income.

Typically REITs have income generation potential by way of renting, leasing or selling real estate, depending on the portfolio it manages. For Indian investors, a global real estate FoF can offer easy liquidity along with simplified taxation process and disclosures requirements as opposed to investing in properties abroad on their own. Global Real estate FoF are a unique opportunity for investors to have exposure to an asset class which has the potential to be income generating and acts as an inflation hedge.

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