Direct Residential Real Estate Funds in Switzerland

vs

the dotted line “index” on the latter looks very different. The real property price index almost never had a down leg in the last 7 years.
If you compare the 2 charts, the Fund started off with 3 years of zero wins, while the RE market went 13% up… ? I’m just a tad skeptical on how to get closer to the 1st chart without direct ownership.

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.

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).

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?

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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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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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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hey there :slight_smile:

just a few random charts:

swiss re (crash in the 90s not included)

spi

10 year period only, from pictet

i guess it’s reasonable to expect returns as well as volatility to be between stocks and bonds (closer to the latter one, at least for returns).

yep, i currently hold ~16% of nw spread over five funds.

a) i don’t own a home (some rent inflation hedge)
b) it’s one diversifier among multiple ones, where i prefer it vs. long-term bonds
c) taxes/oasi benefits
d) rebalancing benefits

will i still hold it in 10 years? don’t know, i’m new to pretty much anything other than stocks. gotta keep an open mind when investing.

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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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