Direct Residential Real Estate Funds in Switzerland

Real Estate
103

I think the benchmark index in UBS factsheet is not the property index. It’s the index of real estate funds.

So as usual in bad market conditions, the notional value of real estate drops, this means people holding the funds start selling in panic mode. This doesn’t actually mean that funds started selling their assets (underlying units).

Most likely the drop in Real estate fund prices reflect the drop in premium over NAV. And the Swiss property index is showing the actual transactional prices which never dropped meaningfully.

I think the real estate funds will follow Swiss property price trend in longer term (maybe 10 year horizons) but not in short term (quarterly or yearly numbers). But again, please remember there is a leverage here , so the impact on upside and downside is multiplied.

For UBS fund specific- you also need to keep in mind it’s only investing in German speaking areas.

104

Also the SNB data is overall real estate (incl. SFH), the fund will own mostly apartments, and often will be limited to specific region (e.g. urban area in german speaking switzerland).

105

correct (read: I agree - it might not be right :smiley: ).

What happened between 2017 and 2018/19? Nothing on the market that would’ve generated a panic. The SP500 was going up nicely until the 2nd half of 2018 - maybe everyone was FOMOing into stocks instead? You need to buy when it’s cheap (at least under its own index).

It could be a chance now to be contrarian - drop the stock market and pile into RE before blood flows on Wall St. I guess a lot of people already started that at the end of 2023, hence the bump up in the fund’s price.

Do these funds have a NAV-history of some sort?

106

Direct Residential Real Estate Funds in Switzerland - #82 by nabalzbhf you probably want to start there, the CS report is really where to start when looking at those funds.

Glancing it, it seems 10y interest rates started going down around 2018 (when the agios where going down).

(note: haven’t found one more recent than March, I hope they’ll continue providing one after the UBS fusion)

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107

I don’t know about 2017-2019 but I remember when SNB pushed rates up in 2H of 2022, the SIC (which is Swisscanto fund) went down quite sharply (approx 25%). Most likely people assumed that increase in interest rates would lead to price fall. But it didn’t really happen so price went up again.

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108

Has anyone looked at long-term correlation of direct RE to the CH stock market and CH bonds?

Also tagging my fav early retirement analyst @oslasho Do you hold any direct RE in retirement, and if so, what’s your rationale for holding it vs. stocks, bonds, other assets?

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110

Interesting discussion. I gather from your comments that returns and volatility would not make this a particularly appealing instrument in a ‘normal’ portfolio, but what about as a tool to compensate for a short position on RE (as oslasho was mentioning above)? I rent and not looking to buy anytime soon, would it make sense for me to own something like this at a 10-20% of total portfolio (comparable to an ideal primary RE allocation)?

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111

Just sharing an interesting article about AGIO

Intriguing premium (AGIO for RE funds)

112

Heh, was shared upthread :slight_smile:

113

Ahh sorry. I just read it and thought it explains very well some points. Didn’t realise it was duplicate

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114

Is there any summary of some kind about RE investments for Swiss investors? Basically a guide on if, when and what kind of investments to choose (domestic/abroad, REIT, direct residential etc.)?

116

That is a lot of topics to put aside, but generally speaking it is what would happen. You might have extra problems with taxes because you will get cash in lieu of dividend. If I was working for the taxes and hated you, I would definitely use your own broker statements to show that you technically didn’t received tax-free distribution and that you should pay taxes on the distribution. Who knows who would win in court

118

So you mean take margin loan and invest in DRPF?

120

IB will/might loan your shares if you are on margin. That means the statements will show “cash in lieu of dividend” instead of “dividend”. The money comes from the one that borrowed the shares, not from the fund.

About professionnal trader, as I always says, the sentence says “proportionnaly” or something similar. That means that according to me, you need to have a higher yield than the borrowing rate, not just more dividends that the interest in absolute value. It looks like a lot of people don’t come to the same conclusion, but no one with a different analysis has provided a different explaination of the presence of the concept of proportionallity in the sentence.

122

Okay.
I think the main thing to think about a scenario if DRPF drops 20%, would it cause an issue for you or not.

It’s a liquid fund but in the end the underlying assets are volatile.

123

SYEP is when you don’t use margin. They will loan your shares anyway and not give you a cent for it if you use margin.

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124

This only concerns US ETFs and CH funds. I don’t think there is much interest in shorting these RE funds, but if your shares are lent when there is a distribution, technically speaking you are not entitled to receiving back 35% of the Swiss withholding tax :see_no_evil:.

125

So for the not-uber-rich who pay more in wealth tax each year than my entire wealth is, is DRPF still worth considering when planning to invest in RE, or should one rather invest into an SXI ETF?

126

22 posts were merged into an existing topic: Mandatory Expenses once FIREd

127

I got confused on the wealth tax part. Why would it decrease the wealthy tax? Can you elaborate on that?

In my naive view, imagine I deposit 200k cash and purchased 400k worth of DRPF with 200k margin loan. I am paying wealth tax of 200k in both scenarios.