In Australia we’re seeing more and more investors dipping their toes into managed investment funds. Some of these investors often have minimal experience investing in property funds, but with the right guidance and support, they can experience the kind of results achieved by sophisticated investors.
Of course, having confidence in the people acquiring and running your investment properties is just as important as a competitive yield. We spoke with APIL Acquisitions Manager Nic Hughes about what you can expect from joining a managed property fund, as well as tips for choosing a fund that matches your goals.
Nic Hughes is backed by years of experience in property feasibility and analysis and plays a key role in identifying acquisitions for APIL investors. These acquisitions must align with APIL’s core investment criteria, which exist to maximise outcomes for investors.
Here’s what he had to say.
Why invest in a managed property fund?
Managed property funds can help investors diversify their portfolio across asset classes, sectors, and geographies, in financial quantities accessible to a larger base of investors. For example, the minimum investment for most property trusts at APIL is $50,000, where the acquisition value of the entire property may be upward of $50 million.
$50,000 is far more accessible to the average investor than $50 million and allows for diversification across a number of assets. Another benefit is the manager. An investor benefits from the manager’s expertise in selecting suitable properties, based on years of experience.
The investor will also have the property professionally managed, post-acquisition, with distributions paid monthly. This is why it is most important to align with a manager who has a proven record of strong returns, and a strong reputation in the market.
How does a managed property fund compare to other investment options?
Investors won’t typically have the opportunity to invest in a CBD office building or a large shopping centre on their own personal level. Managed funds give access to certain assets, which are totally unattainable to the average investor. Through economies of scale, the fees incurred when ‘pooling’ the money in a managed fund typically decrease as a percentage of the investment, given the investments are bigger in value.
What are the most important features to look for in a managed fund?
The manager itself. Investors want to make sure their money is being handled by experienced professionals, who have their best interests at the forefront of all decision making. It is important to be both buying well in the market and actively managing the existing portfolio with the highest degree of attention. Both will optimise results for the investor. This is why choosing experienced, proven fund managers is pivotal to success.
Can I access my funds early?
Most of APIL’s syndicated investments are typically for terms of five to eight years. During this time, funds invested are considered to be illiquid, which means they are not easily converted to cash or a cash equivalent. This is because there is no established secondary market for the sale of units in a unit trust, which is the usual form your investment is held in.
However, APIL has been successful in the past with assisting investors who want to exit an investment prior to the end of the term, by finding a buyer for the investor’s units in a trust.
How are properties selected for a managed fund?
At APIL, we target properties with strong fundamentals, which provide a competitive yield and have the opportunity for capital growth. We look at numerous macroeconomic factors, such as general market conditions and trends, each commercial sector [retail, office, industrial and some alternative investments], current and future growth opportunities, location, Government investment and developing industries. We typically aim for properties that tenants want to be in – this is more important to us than having a long lease.
What are the risks involved in investing in a managed fund?
While investing in managed funds provides access to different asset classes and industry sectors, there are risks associated with Managed Property Funds. These include the stability of the Fund Manager, no established secondary market for the sale of units, gearing, general market risks, economic conditions, leasing risk and tenant stability.
Do I have to be a wholesale investor?
No. Many of APIL’s funds are Retail Funds, which are open to anyone looking to invest. These funds must be registered with ASIC and require a higher level of compliance and reporting. As a result, retail investors receive a greater degree of comfort, and are more regularly informed about the performance of their investment.
Should I invest in one managed fund or more?
It is entirely up to you. Investing in multiple managed funds is common as investors try to diversify their portfolio reducing the variance in their performance. Speak to a financial advisor about investing in one or more managed funds as they will understand your personal needs and provide you with personalised advice.
If you’d like to know more about how an APIL managed fund could work for you, please get in touch. Right now, we also have opportunities to invest in our latest fund – APIL Industrial Fund No. 1. Eligible investors may contribute a minimum of $50,000 to become a part of this fund.
Click here to register your interest.