A global property portfolio

As a property investor in Malta, I am finding the prices of new deve-lopments very high and wish to consider alternative property ventures abroad. My knowledge of buying property in the likes of UK, US or Asia is very limited and would therefore wish to invest through some form of collective investment scheme that invests in property across various countries. Are there such schemes available and from an initial investment of Lm15,000?
I think it is safe to say that nearly all property owners in Malta will be sitting on a 'material gain' as regards the profit made on their home. My only concern from an investment perspective is the amount of speculation that is now built into the property market with the amount of pre-construction deals made going through the roof.

I would not normally categorise property as a speculative form of investing but rather that of a secure, solid asset. When investing directly in property, you must therefore determine whether it is for investment/speculation or not. The local market is also very difficult to predict.

We all know that diversification is the key to any investment portfolio and the same should be said of a property portfolio. For example, where is the diversification of owning three apartments in the same block of flats?

Diversifying into other geographical areas, such as the UK, US, Europe and Asia, is therefore advisable to boost potential returns from a property portfolio and reducing the risk by diversifying. The practicality of buying properties overseas can be cumbersome, expensive and time-consuming.

Local tax laws must be observed and lawyers appointed in a country that you may not be entirely familiar with.

A solution is to therefore to avoid buying property directly and instead buy into a property fund, whereby other investors' funds are pooled together, in the same way as any other form of collective investment scheme operates.

There are individual property funds that buy in Asia or US specifically, for example. Buying these individual funds creates diversification in that each fund may be investing into several individual property shares or in fact own properties outright.

I would actually take the process one step further and increase the diversification even further by investing into a 'fund of funds', i.e. an investment manager creates a port-folio of five to 10 property funds that each specialise in different geographical locations or sectors.

In doing so you could create a property portfolio of funds that cover sectors such as the UK commercial property sector, European residential property and Asian property. The individual funds within the portfolio are monitored by the 'parent' fund manager to ensure they perform accordingly and the manager can add/remove funds at any time.

All of this may appear to be a much specialised area, where substantial funds are required by investors to participate in such a venture. The reality is that investments from $10,000 can be made into such portfolios and you enjoy the rewards and diversification normally only associated from very large outlays.

Mark Hollingsworth is the director of Hollingsworth International Financial Services - licensed by the MFSA to provide investment services under the Investment Services Act 1994 (IS/32457). Address any financial questions to: Mark Hollingsworth, c/o The Sunday Times, PO Box 328, Valletta CMR 01. Alternatively, he can be contacted on 2131-6298/9984-2614 (office hours) or e-mail mh@hollingsworth-int.com

Past performance is no guide to the future and, except where amounts are guaranteed, the price of your investments (and the currency in which it is denominated) may fall as well as rise. Your personal tax situation will depend on residence. Always consult a professional adviser. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation.