The recent increase in interest rates has put pressure on the premiums of real estate funds, but investors and savers should take a closer look. Real estate is popular not only for direct investments but also for indirect investments such as real estate funds. In Switzerland, there are currently 42 real estate funds with a total market capitalization of 58.9 billion francs in April this year. UBS dominates the market, managing several of the largest funds.
Real estate funds offer opportunities for diversification in portfolios, daily liquidity through trading on the stock exchange, and potential tax advantages compared to direct investments. However, investors have no control over the fund manager and associated fees and are influenced by the stock market. Asset liquidations can also occur at unfavorable times due to the fund’s structure or economic influences.
It is important for investors to consider their personal financial situation when investing in real estate funds. Overexposure to real estate assets may lead to an overweighted position in this asset class, which may not be suitable for everyone’s investment goals or risk tolerance. Investors should carefully evaluate their options before making any investment decisions and seek professional advice if necessary.
One factor that may be contributing to the decrease in premiums of Swiss real estate funds is rising inflation and interest rates since 2022. With higher discount factors used for property valuation based on these factors, it is possible that some funds are undervalued.
While investing in real estate funds can provide opportunities for diversification and liquidity, it is essential to be aware of the risks involved and to carefully evaluate one’s personal financial situation before making any investment decisions.
