Managed Fund vs. REIT

Attribute	Managed Fund	REIT
Investment Structure	Pooled investment vehicle	Real estate investment trust
Investment Strategy	Diversified portfolio of securities	Investment in real estate properties
Liquidity	Redeemable at NAV	Traded on stock exchange
Management Fees	Management fee charged	Management fee charged
Dividend Distribution	Income and capital gains	Rental income and capital gains

Introduction

When it comes to investing in real estate, there are several options available to investors. Two popular choices are managed funds and Real Estate Investment Trusts (REITs). Both offer exposure to the real estate market, but they have distinct differences in terms of structure, management, and potential returns. In this article, we will compare the attributes of managed funds and REITs to help investors make an informed decision.

Managed Funds

Managed funds, also known as real estate mutual funds, are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of real estate assets. These funds are actively managed by professional fund managers who make decisions on behalf of the investors. Managed funds can invest in various types of real estate, including residential, commercial, and industrial properties.

• Managed funds offer diversification by investing in a range of properties across different sectors and locations.
• Investors in managed funds do not have direct ownership of the underlying real estate assets.
• Managed funds typically have higher management fees compared to REITs.
• Investors can buy and sell shares of managed funds on the open market, providing liquidity.
• The performance of managed funds is dependent on the expertise of the fund manager and market conditions.

REITs

REITs are publicly traded companies that own, operate, or finance income-producing real estate. These companies are required by law to distribute a significant portion of their income to shareholders in the form of dividends. REITs provide investors with an opportunity to invest in real estate without directly owning physical properties. There are different types of REITs, including equity REITs, mortgage REITs, and hybrid REITs.

• REITs offer investors the ability to invest in real estate with relatively low capital requirements.
• Investors in REITs receive regular dividend payments, which can provide a steady income stream.
• REITs are traded on major stock exchanges, providing liquidity for investors.
• REITs are subject to market fluctuations and may be influenced by interest rates and economic conditions.
• REITs are required to distribute at least 90% of their taxable income to shareholders in the form of dividends.

Comparison

Managed funds and REITs both offer investors exposure to the real estate market, but they have distinct differences in terms of structure, management, and potential returns. Managed funds provide diversification by investing in a portfolio of properties, while REITs offer liquidity and regular dividend payments. Investors should consider their investment goals, risk tolerance, and time horizon when choosing between managed funds and REITs.

• Managed funds are actively managed by professional fund managers, while REITs are publicly traded companies.
• Managed funds offer diversification by investing in a range of properties, while REITs may specialize in specific sectors or regions.
• Managed funds typically have higher management fees compared to REITs, which may impact overall returns.
• Investors in managed funds do not have direct ownership of the underlying real estate assets, while REIT investors have ownership through shares.
• Managed funds may provide potential for capital appreciation, while REITs offer income through dividends.

Conclusion

In conclusion, managed funds and REITs are both viable options for investors looking to gain exposure to the real estate market. Managed funds offer diversification and potential for capital appreciation, while REITs provide liquidity and regular income through dividends. Investors should carefully consider their investment objectives and risk tolerance before choosing between managed funds and REITs. By understanding the attributes of each investment option, investors can make informed decisions to help achieve their financial goals.