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Real estate funds not a proxy for runaway housing markets

Published on: January 18th, 2022

Canadians watching housing markets’ stratospheric rise may be wondering if real estate mutual funds are another way to participate in this growth.

There are over 40 real estate sector funds in the Canadian marketplace. These funds allow investors to invest in the real estate sector as a whole or specific sectors with it both in Canada and abroad. They tend to be dominated by commercial real estate companies along with some residential real estate such as apartment REITs.

Conversely, many of Canada’s largest builders of family homes and condominiums are privately owned and do not trade on the stock market. In some countries large developers, both publicly traded and privately owned, do manage large portfolios of single-family homes. This phenomenon is very new to Canada and doesn’t yet provide many opportunities for individual mutual fund investors.

Those considering existing real estate mutual funds should note that office and retail real estate are subject to many different economic forces than house building so investors need professional advice to understand whether these funds are appropriate for them.

While not a substitute for buying a home or an investment property, real estate mutual funds could still have a useful role in some investors’ mutual fund portfolios, adding a unique form of asset class diversification. To assess whether these mutual funds may be right for you, let’s set up a portfolio review.

Source: FundData. Mutual Fund Search. Oct. 15, 2021.

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