Chinese fund managers are giving local investors a chance to cash in on the U.S.?s recovering property market without any of the regulatory headaches that come with trying to buy a home abroad.
Guangzhou-based GF Fund Management Co. is launching two funds?one denominated in dollars, the other in yuan?that will buy shares in the 120 real-estate investment trusts tracked by the MSCI U.S. REIT Index, which is seen as a proxy for the U.S. real-estate market.
The funds will be launched on July 8 and offered to retail and institutional investors at banks and brokerages. The minimum investment is 1,000 yuan ($163), which could draw middle-class investors.
?We?ve had requests from investors here to launch a U.S. real estate-related product,? said GF Chairman Wang Zhiwei. ?People comparing property prices in the U.S. and China said the lower prices in the U.S.?and the potential for higher returns?make it more attractive.?
More affluent investors are also looking to diversify their assets, and they feel that investing in the U.S. makes sense given the recovering economy there, said David Qiu, GF?s global investment portfolio manager.
Chinese nationals looking to buy a home abroad face numerous barriers, such as having to find ways to get around the $50,000 annual cap on overseas investments.
Mr. Wang said such restrictions make GF?s soon-to-be launched funds a more viable alternative. China has no locally listed REITs.
GF will be making its investments through China?s Qualified Domestic Institutional Investor program, through which Chinese institutional investors are able to invest in overseas securities within predetermined quotas.
Mr. Qiu said that GF had received a $1 billion QDII quota in 2009, and has only used around $200 million so far.
He declined to say how much GF is hoping to raise for these funds, but added the funds are unlikely to have any impact on the U.S. property market.
Word of GF?s funds comes after Guotai Asset Management Co. said last week it had launched an equity fund tracking U.S. companies in the real-estate supply chain, noting that the recovery in the local property sector appears more solid than it was a year earlier.
Other fund managers have more long-standing funds focused on the U.S. Penghua Fund Management?s U.S. property fund, which also invests in REITS, has had an investment yield of 10.6% since its launch in 2011, according to its website.
But such returns aren?t guaranteed. Property stocks in the U.S. had a turbulent run during the subprime crisis in 2008 and were slugging during the ensuing downturn. The MSCI U.S. REIT Index recorded a 13.1% return in the past year?but its five-year return was? just 3%.
The stocks in the MSCI U.S. REITS Index have a combined market capitalization of $507 billion.
? Esther Fung
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