Several Australian property development groups have collapsed in recent times, leaving thousands of people with little to show for their investment. This highlights the importance of ensuring your investments reflect your personal risk profile, and it’s also a lesson in making sure you read the fine print before going ahead.

Why invest in property?
The obvious question that springs to mind is why so many Australians choose to invest in unsecured high-risk property development groups. The answer is simple: the prospect of high returns (and in some cases, poor financial advice).
While these financial disasters might initially have the effect of warning investors off commercial property, there is another way to reap rewards from this sector. Managed property funds can provide a strong platform from which to access the benefits of commercial property investment.

What is a managed property fund?
As you wander through any capital city, you will notice large buildings, shopping centres and skyscrapers that house commercial offices, businesses and residential apartments. These buildings are often owned by listed or unlisted property trusts that lease the building and collect rent for investors in the trust.

If a trust is listed, investors can buy its shares on the stock exchange, while unlisted trusts are privately held by institutions or individuals. In this way, large properties such as shopping centres and skyscrapers are broken up into smaller units of value. This allows investors to combine their resources and gain access to what can often be very good quality assets.

So, how does the ‘managed fund’ part of this fit in? This is where the advantage of a team of investment professionals comes into play. As you might imagine, the performance of property trusts will vary considerably, depending on the underlying property assets. A managed fund employs specialists to invest money into various trusts they deem likely to deliver earnings in line with the fund’s strategy.

Having a team of investment specialists thoroughly research each trust and diversify their investments means investors are less likely to be caught short. Such a team would not put all their eggs into one basket. Instead, they diversify their property investment exposure according to a stated strategy.

Is it right for me?
Like all investments, managed property funds contain an element of risk that should be considered. And it’s always a good idea to seek independent advice and make sure you know whether you are making a decision that’s right for your needs.
If you’d like more information on your investment needs, give ipac a call on 1800 626 881 today to arrange a no-obligation appointment with a professional financial adviser.