Investment in 'hybrid' property funds up 400%

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New property investment research has revealed that the hybrid property funds sector has grown by a massive 400 per cent in the past two years.

Hybrid funds, which combine direct ownership of 'bricks and mortar' assets with investment in property securities, such as units in a listed property trust, are not new - however, they are quickly gaining popularity and becoming a mainstream investment option.

The latest research, released by Managed Investment Assessments (MIA), revealed that the sector has grown from $1.24 billion as at December 31 2004, to $6.06 billion at December 31 2006.

The growth had been driven by investor demand for liquidity, and a platform-friendly investment structure, said Anton Lawrence, MIA Director.

"Hybrid, by definition, means a mixture, and [with hybrid funds] investors are now getting the best of all the worlds," Lawrence explained. "Historically, hybrid property funds aim to maintain an asset allocation of 50% to direct property, and 50% to listed property securities. As such the hybrid fund offers significant diversification."

"This diversification has not affected returns and the hybrid sector continues to provide high total returns of more than 25% in some cases."

Hybrid funds invest in listed property trusts that allow 'mums and dads' to invest in shopping centres, office blocks and other large properties that would not otherwise be available to them.

They can offer a blend of property types (retail, commercial, industrial and residential), with wide-ranging geographic spread (state, national or international) and a mix of income and growth style investments. Also, because a substantial part of their assets are directly owned properties, hybrid funds are not as vulnerable to unpredictable swings in value as shares.

Martin Hession, Head of Property at Australian Unity Investments, recommends investors look to hybrid funds as an opportunity to get involved in property.

"Today's property market has many different sectors available through managed funds, such as retail, commercial and industrial properties, and these have very different investment cycles to housing," he said. "With so many choices available today, you don't need to rely solely on residential property to get involved in the property market."

Hession believes that hybrid property funds not only provide a steady income stream, but also generate solid capital growth. "This is great news if you like the comfort of investing in property, but thought it could only ever play a limited role in your personal financial plans," he said.

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