• Capital Growth
• Regular Income
  • Rent exclusive of rates, insurance and repairs
  • upward only rental reviews - income growth
• Security of Income
  • Long term leases
• Diversification
  • historically low correlation with equities and bond returns.
  • Asset class itself provides significant scope for diversification - location and property types
• Equity and Bond Characteristics
  • generate capital growth - equities
  • generate regular income - bond
  • if tenant fails investor still has asset which can be relet

• Liquidity Constraints
• Costs
  • legal fees and tax
  • leasehold property - ground rent or head rent to freeholder
• Management and Maintenance
• Economic Influences
  • cyclical market
• Valuation
  • no daily listings
  • only use of expert opinions
• Government Intervention
  • tax policy on rental income
• Overseas Property
  • practices and traditions quite different from UK

• Retail
  • 40% of total properties
  • 50% of capital value
  • Freehold or leasehold
• Office
  • More cyclical than Retail - driven by strength of business environment
  • In-town and out-of-town classifications
  • Long leases more valuable
  • 'Over-renting' - rental value falls below level of rent paid
• Industrial
  • small proportion

• Short term leases
• Rental less reliable
• Investment geared towards capital growth
• Net income typically lower than commercial
  • management fees, maintenance, insurance and empty letting periods.
• volatility in house prices

• Firms of Chartered Surveyors
• Specialist Property Investment Managers

• Passive basis
  • Hedging
  • Aims to remove risk by removing uncertainty over which direction exchange rates go.
  • Achieved using derivatives, such a forward, currency option or swap.
• Active basis
  • Seeks to profit from trading in currencies
  • Most participants in market don't seek profit - biggest traders are central banks

A financial instrument that derives its value from the price of the underlying asset.

The manager buys or sells the derivative, rather than the asset, often at a lower cost.

Not only linked to single assets but markets and sectors.

Defined as 'investing in securities through a negotiated process'.

Usually involves investment in unquoted companies but also includes acquiring more mature companies (buyouts) and financing debt.

• Venture Capital
  • investment in unquoted companies with undeveloped products or marketing
  • Aim to make profit from floatation
  • VC companies help management of firm achieve criteria for floatation
• Replacement Capital
  • Purchasing shares from another investor to reduce the debt level via refinancing
• Buyout
  • acquires a majority of shares
• Special Situation
  • distressed debt, project finance
  • Mezzanine debt financing - subordinate debt

1. Seed Stage:  Research before start up
2. Start Up Stage:  Product development and marketing
3. Expansion Stage:  business growth for profitable or break even companies.

• Unit Trusts
• Investment companies with variable capital
  • Investors hold shares in fund
  • ICVC is an 'umbrella' structure holding sub-funds
  • Sub-funds can offer different share classes
  • Shares can be bought from and sold back to the manager.
• Investment trusts

• Closed:  Price depends on underlying assets and popularity of the fund
• Open:  Depends solely on the movement of the underlying asset