RetireJapan

northSaver wrote: ↑Mon Jan 23, 2023 10:23 am I am certainly not against REIT funds and invest monthly in a couple in my iDeCo account. This is a long-term investment of course. The problem in the short term is that they are volatile. The eMAXIS Slim developed country fund is down almost 13% over the previous 12 months. And the dividend yields are not that great, 4% or less usually. I like the fact that they reinvest in the fund tax-free though.

One of the selling points of the Minna de Oyasan company is stability. The 6 or 7% yield is supposed to be consistent and you're supposed to get your principal back in full (minus fees) at the end of the five-year term. They're a different beast to REITs in this regard. They still carry some risk of course, and due diligence (and a bit of luck) is required.

My main point was that it might be OK to pay an inflated fee for an investment that fits your risk profile and timescale. It doesn't make sense to me to discard something unusual based on the fee alone.

No, not only fees alone.

The main issues are

1. Valuations - The market is not pricing these products. You are relying on independent evaluations
2. Liquidity - These products are not very liquid, and redemption can be stopped at anytime. (See Blackrock)
3. Risk concentration - Obviously these products consecrate your risk, while you should be seeking diversification.
4. Regulation - There is much less regulatory oversight in these private markets.

TokyoWart wrote: ↑Mon Jan 23, 2023 2:28 pm

No, not only fees alone.

The main issues are

1. Valuations - The market is not pricing these products. You are relying on independent evaluations
2. Liquidity - These products are not very liquid, and redemption can be stopped at anytime. (See Blackrock)
3. Risk concentration - Obviously these products consecrate your risk, while you should be seeking diversification.
4. Regulation - There is much less regulatory oversight in these private markets.

Each of those four criticisms are correct in my opinion but these private REITs can still be attractive investments. They tend to trade at slightly depressed prices compared to public REITs so they often have higher distribution yields and so sometimes in the US private REITs are converted to public REITs with an accompanying bump in price for existing investors. Also some private real estate funds or syndications will get the benefit of using depreciation and (again under US tax treatment) internal use of 1031 exchanges so their tax treatment is very favorable. I've been watching some family members in the US as they entered this space during the last few years and been pleasantly surprised by the returns.