Funds Insider | Large Funds and Small Assets
This article originally appeared on Funds Insider on 22 June 2021.
It should go without saying that day trading your pension is a bad idea. And yet when I look at some of the largest, most popular funds available I get the distinct impression that, in a way, they’re set up to do exactly that. Or, to put it differently, large funds simply don’t take advantage of the full investment market with a patient, long-term approach. As a result, sometimes the average retail investor has to look beyond the big names and take investment into their own hands.
What I mean is this. The secret to good investment is twofold: picking the right asset and having patience. In other words, thinking long-term. When a large fund only considers huge assets and multi-billion dollar household names, they’re ignoring large chunks of the market that could offer fantastic long-term returns.
I’ve heard from fund managers who will say: “We’re not putting anything smaller than £2bn into our portfolios.” That’s fine – if the only thing you’re bothered about is being able to sell everything before lunchtime tomorrow. But that clearly shouldn’t be your only concern because, as we know, you shouldn’t be day trading your pension.
If, however, your concern is not size but the right opportunity, you will quickly find that there are a lot of interesting assets out there that big funds aren’t looking at. As a retail investor, you’re putting your financial future in the hands of a strategy that only considers a slice of the market.
Consider the commercial real estate market. If you turn to a fund that has confined itself by only considering the largest assets, you’re not accessing the return profile you could from the asset class. You cannot find a £4bn property that’s giving you a 7% return. But you can find an £88m one that does.
Recognising that opens up a world of opportunity for the retail investor who makes the effort to find those right assets. At IPSX, we’re making that discovery easier by providing a regulated stock exchange specifically for single commercial real estate assets.
Our first IPO, Mailbox REIT, would be regarded as a micro-cap investment. With a market cap of £88m, no fund with stringent size requirements would touch it. But investments like this can provide an attractive addition to a portfolio that cares more about the quality of an asset than its size.
As IPSX expands and introduces new assets to the exchange, investors will have more and more choice. Different assets with different qualities – all available to prospective investors – will suit strategies with varying needs. The unifying story for IPSX, however, is that all of these individual assets together will offer greater choice.
This idea that bigger is better because liquidity is all that matters continues to do people a real disservice. IPSX offers liquidity and flexibility – these are qualities the property investment world sorely needs – but we refuse to be defined just by that. Instead, we want to offer alternatives and genuine opportunities that you might not have considered. As an investor, there’s a whole world out there for you to explore. Why not dive in and see what you can find?
For more information about IPSX, the Property Stock Exchange, please get in touch with us at firstname.lastname@example.org or by calling us on 0203 931 8800.