Best Real Estate Funds: A real opportunity for European investors

Alternative investments like Real Estate Funds are gaining in popularity among investors seeking returns and diversification during times of economic uncertainty.

Investor Relations Specialist

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Investing in the real estate sector is one of the favourite choices of European managers and investors. On this occasion, we have chosen to analyse the best funds to invest in Real Estate, according to Morningstar.

For this purpose, we differentiate between two categories:

Real Estate – Global Direct in EUR.

Real Estate – Global Indirect in USD.

The following table shows the list of the Best Real Estate funds:

Which are the best funds to invest in Real Estate in Eur?

Source: Morningstar a 05/07/2021. *Except Partners 31/05/2021

Invesco Global Real Estate Fund

The Invesco Global Real Estate Fund is a fund that invests directly in real estate and has a peculiarity that distinguishes it from others: it offers a daily liquidation (i.e. a price), which is very relevant and provides a lot of transparency if we take into account that it is investing in an illiquid asset such as real estate. 

The fund’s portfolio consists of two distinct parts. The first part accounts for 70% of the portfolio and is made up of direct investments in the real estate sector. To increase the diversification of the portfolio, this part has holdings in real estate in the United States, Europe and Asia. The remaining 30% of the portfolio is invested in a cash and exchange-traded real estate fund, which aims to provide the vehicle with greater liquidity to compensate for the illiquid nature of real estate should redemptions be necessary. With a total asset value of $27.2 billion and a presence in 24 countries, it is a fund that brings together the know-how of Invesco’s real estate division, with no less than 38 years of history.

Advantages

The advantages of investing in this fund can be summarised in 5 main pillars: dividend distribution (they have the potential to distribute a consistent and stable income), attractive relative performance compared to other asset classes, stability compared to other listed assets, diversification compared to equities and fixed income, and opportunity, as it offers any investor the opportunity to invest in the same quality assets as institutional investors. 

This fund offers great stability (low volatility relative to the stock market), low correlation to stock market performance and more than 300 investments worldwide with a loan-to-value of 32.6%. The fund has leased buildings to some of the world’s leading companies: ANZ Bank, Microsoft, AT&T, Deloitte, Amazon, The Boston Consulting Group, FedEx and Google. In terms of asset types, the main ones are offices, which occupy 46% of the portfolio, industrial with 21.9%, apartments with 14.4% and retail with 13.4%. 

Return

As of April 30, 2021, Invesco’s Global Real Estate Fund (GREF) has generated a gross return of 6.3%, while since its launch the annualized gross return is 4%, with volatility levels clearly lower than those of other assets such as global REITs (better known in Spain as socimis) or equities. 

Partners Group Global Value Real Estate SICAV

Partners Group Global Value SICAV is a Luxembourg-based investment fund organized as a SICAV with the objective of achieving outperformance and capital growth over the medium to long term by investing in private equity.

It offers investors broad diversification across geographies, funding stages and instruments, while using Partners Group’s relative value investment approach to systematically overweight those segments and instruments that offer superior value at any given time, in order to significantly enhance risk-adjusted returns. Its legal structure allows investors to subscribe and redeem shares on a monthly basis, thus avoiding the long lock-up periods common to most private equity funds.

The investment objective of the SICAV is to obtain superior returns and achieve medium to long-term capital growth by investing in private equity.

The Fund aims to offer investors broad diversification, utilizing the ability to invest across the full range of private equity opportunities: primary, secondary, direct and listed private equity investments, across all stages of funding and geographic regions. By systematically overweighting segments and instruments that offer superior value at any given time, risk-adjusted returns can be significantly enhanced. This is referred to as a relative value investment strategy.

The investment advisor, on behalf of the Fund, intends to follow three closely associated investment strategies when making private equity investments, namely a top-down strategy, a bottom-up strategy (due diligence) and an engagement strategy. The top-down strategy is the screening process used to allocate investment according to financing stage (venture capital, buyout, special situations) and geography. The bottom-up strategy is a screening process with the objective of identifying those private equity funds, listed private equity investments and direct investments within the target sector that are expected to provide superior returns relative to their peers.

Which are the best funds to invest in Real Estate in USD?

Source: Morningstar 05/07/2021

BlackRock Global Funds – World Real Estate Securities Fund 

The fund aims to maximise the return on its investment through a combination of capital growth and asset returns. In addition, it invests globally at least 70% of its total assets in equity securities (such as equities) of companies that conduct a predominant portion of their business in real estate. 

The investment advisor may use financial derivative instruments (FDIs) (i.e., investments whose prices are based on one or more underlying assets) for investment purposes to achieve the Fund’s investment objective or to reduce risk in the Fund’s portfolio, reduce investment costs and generate additional income. 

The Fund may, through DFIs, generate varying levels of market leverage (i.e. where the Fund incurs market exposure in excess of the value of its assets). It is actively managed and the IA has the power to select investments. In doing so, the IA will refer to the FTSE EPRA/Nareit Developed Index to form the Fund’s portfolio, as well as for risk management purposes, to ensure that the active risk (i.e. the degree of deviation relative to the Index) assumed by the Fund is appropriate given the Fund’s investment objective and policy. The IA is not subject to the components or weighting of the Index in selecting investments. The IA may also use its discretion to invest in securities not included in the Index in order to take advantage of certain investment opportunities. However, the target sector and investment policy requirements may have the effect of limiting the extent to which securities in the portfolio may deviate from the Index. Investors should use the Index to compare the Fund’s performance.

Brookfield Global Listed Real Estate UCITS Fund

As one of the world’s largest real estate investors, Brookfield Asset Management owns and manages landmark properties in the world’s most dynamic markets. Its global portfolio includes office, retail, multifamily, logistics, hotel, triple net lease, manufactured housing and student housing assets on five continents.

The objective is to generate stable and growing distributions for our investors, while protecting them against downside risks. Assets are diversified by sector and geography, which reduces exposure to single market movements and minimizes volatility.

The fund seeks to generate superior returns by leveraging existing operating expertise and focusing on core real estate capabilities: leasing, financing, development, design and construction, and property and facilities management.

In addition, the fund seeks to identify mispriced investments within a broad universe of real estate securities. It manages both long-term and opportunistic strategies, investing across all geographies in the United States and around the world, providing investors with exposure to a broad and diversified universe of high-quality real estate assets.

Here you can read more articles about Real Estate investing.

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Best Real Estate Funds: A real opportunity for European investors