Investing in real estate funds: Attractive distributions and inflation protection - financial experts recommend investing in commercial office and business properties.

Investing in real estate funds: Attractive distributions and inflation protection - financial experts recommend investing in commercial office and business properties.

According to a report from www.nzz.ch, interest rates on savings accounts are still ridiculously low. In contrast, real estate funds on the stock market promise significantly more returns, especially office and commercial real estate funds, which pay out around 4 percent annually. The fund industry promotes the argument of inflation protection, since rents are usually 100 percent linked to inflation. Real estate funds are also considered tempting because stock market valuations are more attractive than they have been in twenty years.

The fact is that real estate funds have recorded an annual performance of 4.9 percent over the last twenty years, with an annual volatility that is less than half that of stocks. Commercial real estate is now cheaply valued and experts see this as a clear opportunity to participate in profitable real estate portfolios at a good price.

However, office properties came under pressure last year, far more than residential properties, due to higher interest rates. However, experts assume that stock market prices have already bottomed out and that the independent valuations of the fund properties have so far only led to moderate devaluations.

With regard to UBS's recommendation to increase the allocation to real estate funds, it can be assumed that, despite their higher valuation, real estate funds are an option for investors who have a longer investment horizon and want more than the mini-interest on their savings account. As www.nzz.ch reports, the SNB's expected interest rate cuts may take some pressure off valuations. Real estate funds are therefore an attractive alternative for investors looking for a more profitable investment option.