Swiss real estate funds

Hi guys,

I was wondering if anyone else has considered adding real estate funds to add a bit of diversification to the portfolio (now that bonds are still not very interesting)

I mean funds like patrimonium or bonhote with direct ownership of the properties.

The way I see it there’re some pros:

  • Diversification (that of an alternative investment)
  • Tax benefits: no tax on wealth/ withholding for the subscriber and the fund gets taxed with a lower rate
  • Properties in sought after locations

Then some cons:

  • Cost. High TER (0.70/ 0.80 compared to for instance 0.09 of VT)
  • Not very liquid

What do you think ? Does it make any sense to include them in the portfolio ?

Kind regards,

Javier

Yes, it is a good idea to have real estate in general in your portfolio. You can buy them instead of bonds, but they are between stocks and bonds, so if you do that you should also buy less stocks as well.

The funds with tax advantages are not better than other real estate funds if you don’t pay much wealth tax or income tax so most normal people should consider the ~35 funds and not only the one with special tax status.

I personally don’t consider the TER because I use the tax value, NAV (growth) and the dividend to evaluate them.

The liquidity is not that bad actually. Sure it is not UBS but you can sell them almost everyday.

The price of those fund is quite high at the moment (I sold part of my Bonhote position the other day) and most of the real estate “Black Friday offers” are stocks from the SPI and not funds. But the funds can’t have more than 33% debts except on the first year(s?) so I guess that explain part of it.

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Do you know of / can you share some references to some good resources where one could start learning more about real estate funds (not even necessarily Swiss)?
Are those REITs you are talking about or these are set up differently?

I think the only way you can really learn about real estate funds is by reading their annual reports (yes it is a lot of work).

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You can have a look under immofunds.ch in order to get some information like the agio (a.k.a. price to book) of the fund.

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Thanks @bamboo, it’s really useful.

I guess to access those funds you really need a Swiss broker, right?

That is, I don’t think they can be purchased using IB, TD, DeGiro and other international brokers.

I buy them via IB. A lot of them were missing so I asked them to add them and it usually takes less than 24h. When CT was my only broker, I asked them If they could add them. They said no eventhough I pointed out that they already had some available… “Swiss premium customer service”

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True:

image

I should have checked myself, thanks.

I had a look at the latest report of the Bonhôte fund (in French) and… it seems that it’s earning very little money! It’s probably due to the fact that they are using very little leverage (around 20% apparently).

They have about 1 billion worth of assets and they generate 10 millions in earnings. That’s a PE of 100. Their ROIC (return on invested capital), what is actually the intrinsic yield of the fund, is 4.2%.

I like the possibility of getting your dividend in additional shares to avoid taxes but overall it doesn’t seem like a good investment at all… or maybe I’m not getting something.

  1. Yes Bonhote is overpriced at the moment
  2. the leverage is low because the maximum is 33% for Real estate funds anyway. You can buy RE stocks If you want more leverage
  3. it is mostly residential so yes it is supposed to earn less than Streetbox or Procimmo

You also missed the fact that it is the half-year report. So you can double the earnings. What’s more the value of the buildings is increasing (11.4 millions in that report)

You’re right, I didn’t realize it was only a 6 months report, good catch.

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