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Tutorial: Real estate funds

What are real estate funds?

Real estate funds, as indicated by their name, are special shares funds investing in good-quality real estate, either directly or via real estate companies. Minority parts of their portfolios are also invested in bond instruments and money market instruments ensuring the fund liquidity. Investors have the opportunity to use advantages resulting from the ownership of good-quality real estate without being liable personally for obligations arising out of the operation of the real estate. They participate in various segments of the real estate market – offices, shopping centres, logistic complexes, residential real estate, hotels, etc. – with various development cycles and thus with the possibility to optimize the total yield by choosing correct investment strategy. In combination with the growth of the real estate value, they can achieve attractive yield, comparable with more risky types of investment, in particular in the long-term horizon time. Real estate funds are best for investors who do not want to or cannot own real estate directly. The funds are classified into the category of the so-called alternative investments. As the yields of real estate funds do not depend on the development of stock and bond markets directly, they should be used as a supplement to the investment portfolio with a view to the increase of the yield potential and distribution of market risks.

How do real estate funds work?

The goal of real estate funds is stable valuation of money invested in commercial real estate by the fund participants. The main part of the fund yield consists of income from real estate leasing. The income combined with active administration of real estate and growth of its market price can lead to very interesting yields. Real estate funds invest most money (up to 80%) in tangible and visible assets that are easy to value, i.e. in specific real estate. To ensure the payout of buying participants, the fund holds a part of its money in financial assets that can become liquid fast – money market instruments and bonds.

Your advantages

  • Yields of real estate funds do not depend on the development of stock and bond markets directly
  • If the recommended investment horizon is kept, it is possible to achieve a higher yield than with bond funds
  • High liquidity – fast payout of money without penalties
  • Wide diversification of fund portfolios into numerous real estate, reducing the risk of drop in the investment value
  • Either lump sum or regular investments
  • High transparency

You should know

  • Real estate funds are optimum funds for regular medium-term and long-term investments which reduce the risk of their improper timing
  • Real estate funds are collective investment funds in the form of open shares funds
  • The value of investment in shares funds can go up or down, and return on the amount invested is not guaranteed
  • All details on shares funds and risks connected with investments in the funds, including information on the investment company managing the fund, are provided in the Fund Statute

Purchase conditions

Who can buy?

  • Citizens of the Czech Republic or foreign nationals over the age of 18 years (legal representative in the case of a minor)
  • Legal person, natural person–entrepreneur
  • Other entities established under the laws of the Czech Republic (foundations, movements, political parties)

What documents should be signed by the client

  • It is necessary to sign the Investment cervices contract and complete the Client knowledge profile. You can handle that at any branch of Česká spořitelna.

What is needed for signing the contract

  • Natural person
    Valid identity card (ID card or travel, diplomatic or service passport, residence permit)
  • Legal person
    Proof of legal personality – an extract from the Commercial Register (original or certified copy) not older than 3 months, and proof of entitlement to dispose of share certificates signed by representatives
    Document to verify identity (natural persons – e.g. company executive)
  • Other entities
    Proof of legal personality, which is issued by the appropriate authority that either approves or registers their activities. And here, there are no 3 months... isn't it possibly discrimination?

How do real estate funds react to inflation?

Real estate funds are protected against the inflation growth by a contract. Lease Contracts for real estate owned by real estate funds comprise inflation clauses which modify rents pursuant to the growth of consumer prices retroactively. The Lease Contracts define the principle of rent increase, including the type of the applied index and date of increase.


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