HNIs desert sinking stocks, hitch to realty PMS

June 6, 2008	(Be the first to rate this story!)  Loading ...
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Trashing the age-old belief that a fall in equities would result in flattening real estate prices, high net worth investors (HNI) are pushing wealth advisers for more exposure to realty assets.

The coming months are expected to witness the launch of real estate portfolio management services (PMS) by wealth managers. Though the product is discreetly marketed as real estate PMS, the fund will invest more like a venture capital fund wherein it will invest in live projects and also gain through rentals and space selling, industry sources said.

“Though we have not finalised the product format, our real estate PMS fund will invest across the real estate spectrum. It will be a discretionary portfolio, consisting of pooled money from investors, choosing live projects of unlisted companies as well,” ASK Wealth Advisors CEO Rajesh Saluja said.

Such investment funds will have a lock-in period of 5-8 years. The minimum ticket size for investment ranges from Rs 25 lakh to Rs 1 crore. Investors have the option to put money in tranches as per the demands of the fund manager.

“We are starting this as an extension of our real estate investment advisory business. With equities losing sheen, our clients are demanding more exposure to real estate projects,” Mr Saluja added.

HDFC Asset Management’s PMS division has a similar fund that invests in securities of asset-level special purpose vehicles, holding structures etc across the real estate sector spectrum. The portfolio seeks to attain returns by investing through structured debt, mezzanine funding and innovative equity-linked products as well. The fund does not invest in live projects, as per the product document.

Real estate PMSs differ from private equity funds in their investment style. While private equity funds invest in the whole company, portfolio real estate investments only invest in large projects of a company. Unlike private equity funds, real estate PMSs only has the mandate to invest in real estate projects. They do not invest in sectors outside the real estate domain.

“The sluggishness in equities market is one reason why such funds are in vogue. If the funds are on the lines of a PMS, it will not be able to invest in live projects because of Sebi restrictions. Though these are marketed as PMS funds, they will be on the lines of venture capital funds,” Emkay Shares & Stock Brokers business head Akhilesh Singh said.

“It is a matter of structuring the product. Many are floating private equity real estate funds as PMS funds to get more small investors into the fold. Though pooling of portfolio investments is not allowed , fund managers could keep separate accounts at their end while maintaining a collective pool account on the investment side,” a PMS fund manager said on conditions of anonymity.

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