Professional systems for semi-professionals

Real estate investments are usually either expensive or a cluster risk for smaller assets. The asset manager Liqid wants to change that with a new fund offering.

A mixed portfolio of real estate is what many investors want - but not easy to realize.

Dhe real estate investment environment has not become any easier recently in the wake of increasing politicization. This is particularly felt by the shareholders of real estate companies, whose prices have come under considerable pressure since the Berlin Senate decided to prohibit rent increases in the capital for five years. Investors who wanted to bring stability to their portfolio with a real estate investment in this way were painfully reminded of the horseshoe of this type of real estate investment.

What is actually desired would be a diversified real estate portfolio that is independent of fluctuations in the securities markets. But that fails for the vast majority of private investors simply because of the lack of wealth. Anyone who nevertheless invests a part in real estate creates other risks instead: For example credit risks if one acts as a lender for real estate projects via crowd investing or cluster risks because too much money is in too few projects. This is also the case with many closed-end funds. And even if they invest in a portfolio, a high cost burden often remains a problem.

Not for small investors

The asset manager Liqid, who sees himself as a fintech, but not as a robo-advisor, is now promising to remedy the situation. “Our customers can decide for themselves whether they want to invest their assets exclusively digitally or with personal telephone support and whether they prefer to invest computer-assisted in ETFs, i.e. exchange-traded index funds, or with human expertise in active funds and ETFs,” says Christian Schneider-Sickert , Chairman of the Board and Founder of Liqid.

Or recently also in real estate. To anticipate: Liquid is not suitable for small fortunes either. 200,000 euros is the minimum investment, and if you only want to add ten percent to an otherwise liquid portfolio, you need a total of two million euros. The reason is simple: “With a lower minimum investment, it would be a product for private investors. This entails immense costs for the preparation of prospectuses and reporting obligations. But we wanted an inexpensive product, ”says Schneider-Sickert. Kim Fomm, Managing Director of Liqid AM adds: “One would think that the regulation tries to keep private investors away from attractive investment opportunities.”

A structured mix

The product is structured as a classic closed-end fund in which the investors act as limited partners. There is no issue surcharge, and the bottom line is that Liqid states that the total expense ratio is around 1.1 percent annually, of which 0.72 percentage points are the management fee. The fund will run for ten years and will initially have a volume of 30 million euros. There is three extension options for one year each time.

The fund should invest in institutional real estate funds and in this way create a structured portfolio: 60 percent should be invested in Europe, 35 percent in the United States, 60 percent in residential and 40 percent in commercial real estate. In the main, Liqid, which is supported by the multi-family office HQ Trust as with its private equity investments, relies on two strategies called “Core Plus” and “Value-Add”.

In the first case, it is about buildings in good inner-city and attractive peripheral locations, which may not always be in top condition. The aim is to increase the value and ultimately also the rental income with little renovation effort. “Value-Add” goes one step further. Investment properties are supposed to be multi-family houses from the currently less popular 60s to 80s, which are upgraded or energetically renovated and can then be re-let.

For a long time, “core” properties were the means of choice for real estate investors: popular cities, best location, very good condition. But here the returns are currently only in the range of two percent. “Core investments are currently more likely to be made by institutional investors who are looking for an alternative to the money market,” says Jochen Butz, who, as a managing partner at HQ Trust, is responsible for the area of ​​alternative investments.

Even if a few good years have already passed on the real estate market and even more money could be earned a few years ago with a “core” strategy – with the right strategy one can continue to be successful in the real estate market. The facility with Liqid Real Estate is expected to bring an annual average of five percent. In any case, the investment requirement remains unchanged.