Real estate investment funds

Investing in real estate funds 

Real estate funds can be divided into two groups, the first of which is Open Investment Funds. The other Closed Investment Funds. The management board decides how the fund will be built and how the units will be sold.

It depends on the Society's idea of how and when we will buy participation units or certificates.

Acquisition of an Open ended investment fund

Open ended mutual funds include funds whose participation units may be purchased at any time on the market. Sales are conducted by Investment Funds Companies through their websites, banks, partner outlets, financial advisors or Internet platforms specialized in the distribution of funds.

Acquisition of the closed investment fund

Closed end investment funds include funds whose certificates can be purchased during the subscription period. The number of available certificates is well defined, which in some cases may cause difficulties in obtaining them.

The form of sale may be similar to open end funds, although usually it is much fewer outlets. After the sale is completed by subscription, the certificates can be purchased on the exchange.

Sale

Open end fund participation units can be sold at any time, taking into account, of course, their price and thus the profitability of the investment itself. We sell these units to the Investment Funds Company itself, the one that issued them earlier.

In the case of a closed end fund, the situation is somewhat different. A natural way of selling and thus closing an investment is to end the life of a fund, which is provided for in the prospectus. This does not necessarily mean that we will get the money straight away. After all, you have to sell real estate.

Another way is to sell the Investment Funds Company, but this is done in strictly defined periods of time. Investment Fund Companies apply various solutions, repurchases twice a month or what happened several times a year.

Another solution is the sale on the Exchange. But here we should know that in order to be able to sell our certificates, someone must want to buy them from us. This may not be so easy, especially in a short period of time.

Differences between individual funds can be reduced to the most visible and crucial ones for the client. One of them is investment policy.

How much the fund will earn depends on the investment policy.

These are the basic assumptions of the fund's operation. The idea is to prepare a suitable product under certain conditions on the market. Adequate management and response to changing financial circumstances is also crucial.

Closed end investment fund

Managers express themselves here directly, these funds have access to more financial instruments. This means greater security and the possibility of taking more risk in order to increase the return on investment.

Derivatives may be one example of this, as they may be needed in the event of a disruptive stock exchange situation.

Open ended investment funds 

The requirement to hold specific reserves and the limited possibilities to use financial instruments are doing so. The creation of provisions is related to the possibility of payment, to which a fund member is entitled. It is practically possible to divest the participation units at any time, which must be prepared for. This significantly reduces the flexibility of investment policy.

If the situation is turning unfavorable, then in the case of these funds an increased redemption will result in the need to sell the assets held, and consequently further price reductions.

Guaranteed investment fund

The certificates of funds can be purchased with a guarantee of invested capital within certain deadlines. Subscriptions, i. e. a fixed period of time for purchase, are advertised by each company.

Please note that the guarantee is valid for the end of the investment. During the course of the study, changes can be observed, which are often unfavourable results. Very often in the first 2.3 years, when a portfolio of specific real estate  is built, the results are negative.

Statute

It is a document containing basic information about the fund. It also sets out the investment policy to be applied in management.