Real estate funds/ETFs: A Swiss Investors Perspective

Investing / Portfolios
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It’s not a fund or ETF, but I hold a position in Investis AG (IREN). I was looking for exposure to residential properties and feel it fits that purpose very well. It’s very regional, but that fit my wishes too, as I find the Lac Leman region has a good future in diverse respects.
Dividend yield has been better, as it has had a decent run on the price side (yield currently about 2.5%).

“Founded in 1994, Investis Group is a leading residential property company in the Lake Geneva region and a national real estate services provider active in the two synergetic segments of Properties and Real Estate Services. The portfolio of Investis Properties consists almost exclusively of residential properties located in the Lake Geneva region and was valued at CHF 1 289 million as at 30 June 2018. Investis Real Estate Services is active throughout Switzerland with well-known local brands. The company has been listed since June 2016.”

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31

You can buy swiss real estate funds, but you won’t get that yield with housing, even with a big minority of commercial. One of the reason is that the law forbid them to have more than 33% financed via mortgage, except during the first year(s) when they can go to 50%.

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I wonder if anyone can share his/her experience in investing fund that tracks the SXI Real Estate® index?

There is actually a whole family for Real Estate indices provided by SIX https://www.six-group.com/en/products-services/the-swiss-stock-exchange/market-data/indices/real-estate-indices.html and each of them probably have Total Return and Price option. For each index there is probably multiple index fund tracking the fund. SIX also provides a file listing our some productions if one invests in the index. https://www.six-group.com/dam/download/market-data/indices/six-index-based-products-en.pdf So basically there is quite a lot of research to be done, but I guess all these options are pretty much the same?

So if you are now investing in one fund tracking one swiss real estate index, which fund is it, which index is it? How did you choose this? Size? Age? Available or not on IBKR?

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Most of the funds were created after the real estate crisis of the 90’s. Only twelve were created before

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Glad to find this post. Yet I am still a bit confused and/or lost in the selecting process. Would you have some direct recommendation of some funds that tracks the real estate index? And hopefully it is tradable on IB. Thank you so much.

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As far as I know, the only ETF tracking the SXI Real Estate Funds Broad index is the UBS ETF SXI Real Estate Funds: CH0105994401. This should be available on IBKR.

There are also mutual index funds tracking the same index. Swisscanto (CH) Index Real Estate Fund Switzerland indirect FA CHF seems to be available to retail investors at Swissquote but I don’t think IBKR offers Swiss mutual funds. CSIF also has one but it is only available to qualified investors (and e.g. via VIAC/finpension).

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Is anybody investing in REIT funds in Switzerland? If so, what are your thoughts and if you want to share, for which funds did you settle and why?

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Are they not dividends oriented companies ?
If you are in a capitalisation phase, it will be suboptimal as it will be highly taxed.

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Related threads: Real estate funds/ETFs: A Swiss Investors Perspective and Real estate ETFs

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The tax value and taxable dividends are reduced for Swiss Real Estate funds (as the funds pay some taxes themselves). For funds tracking the SXI Real Estate Funds Broad index, the reduction is about 40%, if I remember correctly. It may be different for individual Real Estate funds, I’m not familiar with the details.

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Thanks a lot, @oslasho !

I was just reading through it.
Especially the two link1 and link2 are very helpful

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54

Swiss investors can purchase real estate funds in their Pillar 3a.
For instance, Finpension lists “CSIF (CH) III Real Estate World ex CH - Pension Fund ZB”, which tracks the index FTSE EPRA/Nareit Dev (global exposure).

I have made a comparison with the popular MSCI World index (stocks) and we can seen that, with similar volatility and returns, we had the (36-month rolling) correlation below:

image
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Do you think this correlation justifies paying the Finpension 0,39% fee?

More generally, do you own any real estate fund/REITs ETF? Why or why not?

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Don’t buy this kind of products as it is basically companies that are part of the stock market. Buying it would be like buying a supermarket ETF or energy ETF or any sector basically.

If you really want real estate, you can buy swiss real estate funds outside of your 3a. The law limit their leverage. Some of them are interesting from a tax point of view for swiss investors

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56

You have a similar thread of holding EPRA in 3rd pillars.
As these companies distribute high dividends it will optimise taxation.

However I find it weird are all these holdings are already present in VT

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Which do you recommend and why?

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Biggest with most liquidity are Sima, siat, then Anfo…

Then you have different one focusing on green, hospitality or development.

I would focus on the main one since those are (the only ones) with enough trading liqjidity…

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Those funds all don’t hold the RE directly.
For me that’s a tax drag of about 1.7% compared to “direct”, so I decided to go for funds which hold the RE directly.

yes, started smallish positions in BALSP and HOSP recently, outside of 3rd pillar.
For diversification, since I have no other RE, as part of my non-equity bucket, get a little bit more return than Festgeld at some more risk.

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Why would you invest in real estate in the first place?

Many authors recommend doing so, at least for US investors, because of diversification purposes.
What is different for Swiss investors?

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The US is a very special case. There if you have a high earner paired with a spouse qualfying as a real estate professional, you can use bonus depreciation and other rules to dramatically reduce (or even eliminate) your tax burden.

Here things are very much canton specific, but in many there can be huge wealth tax benefits and also income tax benefits (esp. if you buy a doer-upper).

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I won’t give specific names, but you should specifically look at the ones with tax advantages

It’s for the safer part of my portfolio and it is literrally unique in term of taxation. It is not as safe as bonds but you make money if you do your homework (normally)