Please enable JavaScript.
Coggle requires JavaScript to display documents.
Property derivative's - Coggle Diagram
Property derivative's
-
Real estate investment funds may also be established with the objective of investing in property derivates where as an entire strategy or as part of a blended strategy
Investing in a portfolio of real properties can bring uncertainty and volatility, many contributing factors can have either a positive or negative impact on the performance of any one asset
Derivates rely on a point of reference as to the performance of the market, in the UK this is the Investment Property Databnk index and in the US these are NCREIF, S&P, Case-shriller and Rexx
These real estate indices track the performance of the sector as a whole, which can give real estate fund access to the entire sector rather than merely a select pool of physical assets
Rather than investing in physical property assets, buying a derivative means you are investing in what is commonly known as 'synthetic real estate'
-
In a real estate context, a fund may be made up of entirely proper derivate contracts as its sole objective
This may allow funds to gain greater exposure to the market than through buying physcial assets or may even allow a fund to quickly change the composition of its portfolio (eg between retail and industrial property) to take advantage of strong sectors in the market but also to reduce its exposure to poorly performing sectors
An investment fund might hedge its position in order to try to minimise any effect of underperformance of its physical assets