Property funds are less liquid and less volatile than real estate investment trusts.
A property fund is a means by which private investors as well as institutional investment funds (pensions and the like) participate in real estate. Specialists in both undeveloped land and developed real estate professionally manage the investment.
Property funds can offer advantages over publicly traded financial instruments (stocks and bonds) and alternative investments (commodities, hedge funds and private equity and exchange funds) owing to the nature of real estate. With historically low price valuations of many properties – due to the economic downturn – many investors see this as a time of opportunity, while other types of investments are at best erratic in their performance. Also, many investors realise certain tax advantages from investing in real property.
As compared with real estate investment trusts (REITs), property funds are less liquid but also less volatile. For UK investors, a property fund investment can be placed in an ISA (individual savings account) wrapper, which avoids taxes on dividends and capital gains. Further, a property fund does not involve paying commissions to brokers, as is the case with a REIT.
Property funds, like REITs, are managed to avoid the exposure a single investor might face if his or her portfolio were limited to one or a small group of properties. With multiple investors, fund participants can amortise risk across multiple, well-researched and -managed parcels of land.
Lucent's particular focus is in acquiring land and making it "oven-ready" for a developer to take it on and start building.