What is the difference between real estate funds and other investment funds?
What distinguishes investment funds in general is that they are collective investment tools that allow investors to diversify their portfolios and mitigate risks, and thus achieve satisfactory profitable returns, according to carefully thought-out investment plans.
However, the types of investment funds differ from each other in many fundamental aspects and points, which are reflected in the returns and risks associated with them, as well as the investment results.
Below we try to identify the most important differences between real estate funds and other investment funds (such as stock, commodity, and bond funds), with a general comparison between them by examining five main foundations, which are:
1. Type of assets invested in
In other words, the assets that the fund owns or seeks to invest in vary by fund, as real estate funds typically invest in built real estate: such as residential, commercial, office and industrial buildings, or unbuilt, such as owning land that is expected to increase in price and then sell it.
This is in contrast to other types of funds that do not deal with real estate, such as equity funds that invest in stocks, commodity funds that invest in commodity futures, such as oil, gold, and wheat, or bond funds that invest in government and corporate bonds.
2. Sources of revenue
Depending on the type of assets, the funds’ sources of financial returns will differ. Real estate funds achieve their returns by renting the properties they own, or increasing the value of their properties and selling them while making a profit.
As for stock funds, their profits are through the growth of the stock price and the increase in their value. Commodity funds also achieve their returns through changes in the prices of the basic commodities in which they invest. As for bond funds, their returns are through the interest due on the bonds that they purchased.
3. Liquidity
It is known that real estate trading is not as easy as other investment sectors, as is the case with stocks that can be sold at any time, so liquidity in real estate funds and monetization of capital can often take some time, unlike the case with bonds, stocks, and commodities that can be sold at any time during trading hours.
4. Risks
Real estate funds can be considered one of the safest investments, due to their connection to a tangible asset with material value, except for the changes that these properties are exposed to in market prices. In the case of stock and commodity funds, the risk is usually greater, because stocks and commodities are more susceptible to price fluctuations.
Credit risk increases in bond funds, which in some cases may result in a complete loss of capital in the event of bankruptcy being declared by the country or company whose bonds were purchased.
5. Diversification
Asset diversification is often available within all investment funds, real estate or otherwise, with the only difference being the type of assets. In real estate funds, diversification takes the form of investing in a range of different types of real estate, such as residential, commercial, and industrial properties, and in different locations that are expected to increase their price values.
In equity funds, diversification is achieved by buying stocks in more than one specialty, and in commodity funds, by investing in a range of commodities instead of investing in one, and in bonds, capital can be distributed across a range of bonds of different issuers.
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Oragon operates as an accredited entity for establishing investment funds, managing real estate investment funds and venture capital funds, and aims to be a model for innovation and continuous development in Turkey in this field, as it works to enhance the profits of its investors by developing strategic plans to grow their savings, diversify their investment portfolios, and move forward to achieve the highest investment returns, and our company is actively working to expand its investment horizons in the real estate and venture capital sectors.
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