Investments in the secondary real estate fund market tend to outperform direct investments, according to a study.
CBRE and PropertyMatch, the agency’s trading platform for unlisted property funds, found that trading in the secondary market offers a cheaper entry point for investors than the primary market, where a premium of up to 6% to NAV is often paid.
The companies’ data show that investors in the secondary fund market save an average of 6.11% against the primary market price. Speed of execution is also often faster, CBRE said.
“Even against a targeted investment strategy with perfect foresight that only invested in the best performing funds over that period, the analysis shows that a secondary market investor can outperform a direct investor by ~1% on a rolling three-year based on investing in the first secondary transactions that are immediately available,” CBRE’s report said.
Dominic Smith, senior director at CBRE Research, said: “The findings highlight the case for short-term tactical optimism when constructing real estate fund portfolios. While liquidity in the secondary market is lower than the direct market, it remains at a respectable level of around 3-4%.”
To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette
