You elegantly ignored the ± 50% price fluctuation risk there 
RE funds don’t always go up.
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I wonder if the subscription rights are also distributed for shares lent out via seclending.
Should be the case i guess, or at least compensated at value of the rights.
… i can inform after the fact if anyone is interested (if shares are lent out during the period in question)
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Thanks for the note.
Slowly I am coming to the terms that real estate is its own game and comparison with equity might not be correct
It’s just that when asset price to cash flow is so high, it feel vulnerable & it limits the appreciation potential. But on the other hand , I think in Switzerland , it has always been like this.
Hence after reading all the information provided by you & @TeaGhost , my conclusions are
- real estate funds should be seen as a different asset class and not like stocks
- The price to rent ratio depends a lot on other supporting factors like rent control, mortgage rates, amortisation laws etc and hence it’s not easy to compare between different countries
- RE funds do carry interest rate risks , so this needs to be considered
- Agio is just showing the breakdown of different elements of fund construction and cannot be seen as a premium due to market euphoria.
- Even though these funds can be traded daily, they should be seen as long term investments
- The tax efficiency of direct funds vs. Buying rental properties cannot be ignored. They do provide diversification with reduced hassles of being landlord.
- Price to cash flow ratio is high but is representing the reality of Swiss residential real estate
Now coming to tactics
- unfortunately SQ doesn’t have these funds under ETF leaders , so I think I might need to buy them on IBKR
- I am assuming there is no other way to buy any of these funds (CSLP, DRPF etc) other than SIX
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Full number of rights were distributed, despite seclending
Folks
Someone on Reddit made a comment that Swiss real estate funds are very much correlated with Equities and hence do not act as a diversifier.
If I think about it , these two asset classes don’t have same drivers as Swiss real estate is mainly driven by local dynamics while Equities have a lot of international exposure.
If I just look at charts, the overall trend is similar. But when defining correlation between asset classes, what’s the right way to calculate it? It is change in indexes over one month period ? Or a larger time horizon?
In addition, is there a tool which can calculate correlation for different time horizons ?
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Doesn’t it look correlated only on the past 5y? And it still seems a lot less volatile no?
(to me it looks like it reacted similarly to the covid crash and the interest rate increase, not sure there’s a lot more correlation)
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Actually I am also impressed by the overall number. Real estate has outperformed equities in Switzerland this century. That’s quite interesting.
I agree SWIIT is less volatile and correlation in past have been lower (at least visually)
The graphs look quite uncorrelated IMHO, with the exception that they both have risen long-term.
Swiss equity had a really tough/crap begin to this century, 0% gain from 2000 to 2012 for the SMIC (SMI incl. dividends reinvested). It’s played catch-up since then, but can’t do magic.
RE prices however have been turbo-boosted in the same time, by lowest interest rates ever and massive immigration (+20% population in this time).
RE probably also had an easier relative start to this century because the 1990’s was a RE crisis-time, whereas stocks boomed 1995-1999.
Since Covid, commercial RE got whammied by home office/hot-desk trends and retail closures, explaining that recent RE dip.
Maybe the correlation is stronger if one compares equity to commercial RE?
And residential is just an easy-goes-it rise with some flat bits?
Never mind the last 25 years that’s a blink of an eye this article says Swiss RE has outperformed Swiss stocks when looking back 150 years!
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I also don’t agree. I just wanted to calculate how much I disagree
TradingView has a correlation tool for some quick calculations.
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It will be somewhat correlated as both will perform better with a good economy and both impacted by interest rates.
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Agreed, Thats a good way to think about it.
Consider the factors impacting the performance of each asset class.
E.g.
Interest rates will affect both.
Population growth in Switzerland likely to affect mostly real estate with little impact on equities.
The charts for a 100% MSCI ACWI IMI portfolio and one with 90% and 10% SWIIT (monthly rebalancing) look almost the same (can post if you want). Real performance p.a. over the last 30 years are almost identical, both nearly 6%.
Curious if volatility was lower versus 100% MSCI ACWI IMI
Thanks for all this discussion, it is very helpful.
I have two doubts left.
- If I buy DRPF on Interactive Brokers, will the tax office know automatically that they don’t have to make me pay taxes on it both on dividends and on wealth?
- Does the ~2% returns account for the fund TER? So is the real return ~1.3%? Or what am I missing?
Thanks!
Check ICTAX, that’s what the tax office uses.
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Rather than looking at % dividend which keeps changing based on share price, it’s better to look at absolute dividends.
Last dividend for DRPF was 0.42 CHF per share. But since they issued new shares recently, this dividend might reduce per share (can’t say by how much). But yes, this dividend value is after all costs & taxes.
To make sure that you don’t get taxed incorrectly , you should ensure you declare them properly in tax returns. For the cantons where online softwares exist, this is rather easy. But not sure if all cantons have this situation
***Just be aware that final tax value for wealth taxes might not be really Zero because sometimes funds have some assets which are not tax free.
For example tax value for 2023 as per ICTax for DRPF are as follows
- wealth tax relevant value, 31 Dec 2023 (0.117 CHF per share)
- Income tax relevant value (0 CHF per share)
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Thank you for your answer!
So it is also wrong to substract the TER to the yield? Where is the TER paid?
It’s taken from the fund asset (which should be reflected in the price, but you won’t see it since those funds are pretty volatile 
)
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