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Nov. 16, 2020

Blog | Single assets versus portfolios

Generating genuine value for an investor remains today’s number one challenge, especially now in a COVID world. The 60/40 balanced portfolio between equities and bonds doesn’t work and as valuable as it is, diversification – even diversification into the right sectors – isn’t enough to create a defensive portfolio that can withstand the economic storms like the one we’re in now. What investors need is transparency and detail.

Let’s focus on real estate, which is an appealing sector for those looking for yield in a low-yield environment. As an investor, your most likely channels into real estate are through investments into a portfolio, such as a REIT on the London Stock Exchange or an open-ended retail fund, or by purchasing individual assets.

But even though these options offer investments into the built environment, portfolios generally don’t offer the granularity of performance data you need to make a fully informed investment decision. Individual institutional assets, meanwhile, are prohibitively expensive for the average investor to contemplate.

IPSX Prime, was created to solve that dilemma, allowing investors to buy shares in individual assets such as the Mailbox in Birmingham which is approaching its first IPO this December.

The stock exchange provides a platform where investors can take a detailed, granular view of property assets listed on IPSX. IPSX is working towards providing investors with detailed information such as the rent occupiers are paying and their risk of not paying it. When an individual asset is listed on IPSX, investors will therefore have the best possible understanding of the income it generates.

Why is this important? Knowing how investments perform allows investors to make choices that match their specific needs and their risk appetite.  Greater clarity also allows for more accurate valuations. Remember the start of the pandemic when several open-ended retail funds suspended redemptions because they couldn’t ensure that their asset valuations were accurate. Soon after, the FCA proposed implementing a 90 to 180-day notice period for withdrawals, setting off alarm bells in the industry given that many investors want or need daily liquidity.

It should come as no surprise, then, that HMRC has now warned that the restriction would make open-ended funds incompatible with ISAs. Being locked into investments for up to six months would breach legislation that gives account holders the ability to access or transfer funds with 30 days’ notice.

These are issues that don’t exist in a transparent public market with real-time share prices. As we’ve said before, a building’s value will go up and down, but at least investors will know what that value is and, importantly, why.

Having that detailed insight is the best way to make property investments work for you. Anyone who wants to access the real estate sector should have access to that level of information and that’s going to be finally possible through IPSX.