GENERICO.ruEconomicsInvestors reveal which closed-end mutual funds will make a profit this year

Investors reveal which closed-end mutual funds will make a profit this year

What to look for when choosing a real estate fund

In January-April of this year, experts recorded an influx of new clients into closed-end real estate mutual investment funds (CLIF). Taking into account the expected reduction of the Central Bank's key rate this summer, the attractiveness of such funds will increase. Which commercial real estate properties can bring the greatest income to private investors?

What to look for when choosing a real estate fund

Formally, the first quarter of 2024 turned out to be successful in attracting investor funds to market closed-end real estate mutual funds. “In January-April, the assets of such funds grew by more than 22 billion rubles, to 345.6 billion rubles,” product manager of Finam Management Evgeny Tsybulsky told MK. The main increase in investments occurred in warehouse real estate. This is not surprising, given the growing trade turnover of large online retailers.

Despite the positive dynamics, experts are cautious in their assessments. As Evgeniy Mironyuk, an expert on the stock market at BCS World of Investments, told MK, the popularity of closed real estate mutual funds can be judged by the volume of attractions in March. According to the Investfunds portal, 75% of all attractions to closed real estate mutual funds in March 2024 were provided by one management company. In general, in March, the corresponding funds with assets of more than 1 million rubles. attracted 13 management companies. “The high discreteness and wide variation in the volume of attraction indicates the low popularity of closed-end real estate mutual funds in March,” the analyst noted. According to him, the annual (over the last 12 months) return on closed-end real estate mutual funds varies greatly, ranging from -99% to +75%. 79 out of 123 closed real estate mutual funds, according to Investfunds, showed profit. 17 out of 79 profitable closed-end mutual funds showed income above the current key rate of the Central Bank (16%).

In January-March, the average return on investments in the warehouse segment was 10-13% per annum, in shopping centers – 8-10% per annum , to offices – 6–8% per annum. It is obvious that with the current income of closed real estate mutual funds available to unqualified investors, it is difficult to compete with the income offered by ruble deposits, stock and money market mutual funds.

On the long-term horizon, the picture is different. The main advantage of closed real estate mutual funds is the low volatility of returns relative to rates in the economy. “Although most closed-end mutual funds showed returns below the key rate, during periods of low key rates, real estate funds can consistently outperform debt market instruments and deposits in terms of profitability,” Mironyuk emphasized. “Another advantage of a closed mutual fund is the ability to “pack” almost any asset into its structure and tax optimization, because tax payment will occur only at the time of redemption of the fund’s shares, Tsybulsky added.

As Alexander Lavrov, Investment Director of East-West Management Company, noted, real estate funds help preserve savings and obtain a stable source of income from renting out real estate. In his opinion, closed-end mutual funds are suitable for those who are not aiming to receive a high income, since real estate is a fairly conservative instrument. Do not forget that funds have commissions that “eat up” part of the investor’s potential income. But such funds help to diversify your investments. In addition, they are convenient for those who do not have enough money to purchase a separate property, but citizens do not want to take out a loan. The entrance ticket to a closed real estate mutual fund is inexpensive.

This type of investment also has disadvantages. First, investors will have to be patient. As a rule, such funds are created for five to seven years. The specific entry and exit conditions are not suitable for everyone. You can buy shares of closed-end mutual funds only during their primary or secondary placement, but it is difficult to sell quickly. In addition, there are closed-end real estate funds available only to qualified investors.

However, as Russian and world experience shows, commercial real estate is one of the protective assets against inflation. “In the future, as the Central Bank’s key rate decreases, the attractiveness of such investments may increase. But one should take into account the limited liquidity of closed-end mutual fund units, as well as different prospects for different real estate segments,” noted Evgeniy Tsybulsky.

Experts believe that this year the warehouse real estate sector and data processing centers (DPCs) will bring the greatest profit to investors, given the fashion for digitalization and cryptocurrencies. “The Russian data center market opens up new opportunities for private investors. Today, the normal profit from such projects for developers is 25%. Over the horizon of 5-7 years, such investments can bring solid returns,” says Vladimir Stolnikov, head of the alternative investment management directorate at Alfa Capital Management Company.

Another favorite of investors, in his opinion, is the warehouse real estate sector: the level of new space declared in the Russian Federation (2.5 million sq. m) is not enough to satisfy the growing demand from e-commerce and new transport hubs. In addition to classic warehouse facilities, the Light industrial sector has good prospects, Stolnikov added. As MK wrote earlier, a number of large banks and investment funds are considering the possibility of creating a closed-end mutual fund Light Industrial.

When choosing a real estate fund, Lavrov recommends paying attention to what objects are in the fund, what kind of profitability the fund gave to the owners shares previously, what is the fund’s strategy and profitability forecast, which must be compared with the profitability of alternative methods of investing money (deposits, bonds, etc.). In addition, it is necessary to find out whether the fund pays interim income or not, until what time the fund will exist, options for exiting the fund (selling shares) if necessary.

“An investor needs to carefully study the assets “packed” in closed mutual funds, how consistently they generate profits, what business the real estate purchased in the funds is associated with. To ensure that the conditions for the acquisition, redemption and exchange of investment shares are correct, the investor should carefully study the Fund Trust Management Rules,” concluded Evgeniy Mironyuk.


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