The beauty of property is the gearing. If you could gear as high to invest in managed funds without the threat of margin calls…. Heres the rub. Dividend imputation and liquidity makes the managed fund potentially a better investment, but the margin call threat means prudence dictates lower gearing for managed funds unless you secure the debt another way. Also there’s Rich Dad’s Prophecy. Still a few years away, but managed funds are a worry at that time if he’s right.

Hi
Listed property trusts are strange things. You’d think the price would move with the fortunes of the underlying property investment. In fact, what happens is they are impacted by this, but they also move with the stock market on which they are listed. This means the value of the trust will be largely driven by the demand and supply of the units available to be purchased on the stock exchange.

Given the limited diversification choices into residential property for institional investors, my take on this is that Westpac expect these investors to buy their units to provide residential property exposure and improve diversification protection for their own unit holders. I’d say Westpac believe the demand will be such that they’ll pick up a whopping big capital gain as the unit prices climb, which has little to do with the underlying property value.

Quite clever really, I expect it might work.