David Swensen, a profoundly influential American investor, wielded significant influence in moulding the investment strategies of institutional funds. Having served as the Chief Investment Officer of the Yale University Endowment for close to four decades, David Swensen authored notable works such as “Pioneering Portfolio Management” (2000) and “Unconventional Success” (2005).
Revered beyond the university for his groundbreaking contributions to investment management and mentorship of future leaders in the field, Swensen was equally esteemed within Yale for his dedication as an educator, astute advisor, and spirited member of the university community.
David has bestowed upon the financial world a multitude of investment principles, a selection of which are outlined below.
Focus on asset allocation
Asset allocation represents a nuanced strategy that extends beyond mere diversification. Below is a breakdown of its fundamental components.
Rebalancing: Rebalancing necessitates periodically readjusting the proportions of various asset classes within your portfolio to uphold your desired allocation. Market valuations fluctuate. Rebalancing enables you to seize opportunities by acquiring undervalued assets while averting excessive exposure to overvalued ones.
Risk management: Although diversification plays a significant role in risk mitigation, it’s not the sole factor to consider. An integral aspect of asset allocation entails evaluating the inherent risks associated with each asset class alongside your overall risk tolerance. This could entail implementing measures such as mitigating exposure to high-risk assets amid market volatility, employing hedging techniques to safeguard against particular risks, and choosing investments that match your risk tolerance.
Returns matter
David aimed to highlight asset classes likely to yield higher long-term returns, albeit at the expense of sacrificing a significant level of short- and intermediate-term liquidity. This clarifies why Swensen didn’t limit his investments to conventional stocks and bonds. He sought asset classes offering the prospect of superior long-term returns, even if they lacked liquidity (meaning they couldn’t be readily bought or sold). This readiness to trade off liquidity for potentially greater returns is a fundamental element of the investor’s Yale Model.Also Read: 10 investing principles of Kirk Kerkorian that elevated him to the status of a billionaire
A measured approach towards diversification
David Swensen’s approach to asset allocation was not characterized by a rigid, one-size-fits-all strategy. The Yale Model is recognized for its diversification across multiple asset classes, and one approach he endorsed is a straightforward, equal-weight allocation. Here’s a breakdown of this method:
Various asset classes: The portfolio is segmented into approximately five or six discernible asset categories, such as domestic equities, international equities, real estate, and fixed income.
Equal allocation: Each asset class is allocated a similar proportion of the overall portfolio investment. This streamlines portfolio management and guarantees extensive diversification.
Active management helps
Swensen’s conviction in the value of active management forms the foundation of the model. It emphasizes the utilization of proficient investment managers who strategically select assets to surpass market performance, thereby providing a means to bolster portfolio returns. This differs from individual investors attempting to identify the “hot” stocks independently.
The Yale Model emphasizes investing in asset classes where active management stands a greater chance of success. These often include less efficient markets such as private equity or venture capital, where information may be less readily accessible. Conversely, Swensen acknowledged the challenge of consistently outperforming the market in highly efficient markets like large-cap US equities.
Don’t try to time the market
Swensen recognized the perils associated with market timing and its potential to undermine the success of the Yale Model. Forecasting short-term market fluctuations is notoriously challenging. Swensen likely understood that even the most sophisticated analyses couldn’t ensure success in timing the market. The investor emphasized a long-term investment horizon. Making frequent adjustments based on short-term trends could disrupt the overarching strategy and potentially result in prematurely selling profitable investments or purchasing overvalued assets.
Market timing decisions are frequently guided by emotions such as fear or greed. Swensen probably grasped the significance of disciplined, rational investing founded on thorough research and long-term objectives.
Research well before investing
David Swensen’s focus on extensive research was a cornerstone of the Yale Model and a significant factor in its achievements. Below is an analysis of why meticulous research held such significance for him:
Understanding investment dynamics: By conducting deep research, Swensen aimed to gain a comprehensive understanding of the forces driving an investment’s performance. This included factors like market trends, industry competition, and the company’s business model.
Assessing uncertainty: Investments inherently entail a degree of uncertainty. Swensen utilized research to quantify this uncertainty through the analysis of historical data, simulation exercises, and the evaluation of potential risks.
Assessing competitive edge: A robust competitive position is pivotal for ensuring long-term investment success. Swensen’s research likely centred on identifying companies possessing enduring advantages over their competitors.
Alignment of time horizons: Various asset classes possess differing investment horizons. Swensen utilized research to ensure that investments aligned with the endowment’s long-term objectives and liquidity requirements.
Exploring upside potential and exit strategy: Research contributed to pinpointing the prospective upside of investment and devising a well-defined exit strategy to capitalize on those gains when appropriate.
Contingency planning for worst-case scenarios: Astute investors don’t solely concentrate on favourable outcomes. Swensen’s research probably involved stress-testing potential investments to comprehend their performance under adverse economic conditions.
David Swensen’s enduring legacy persists long after his passing. His insight into the complexities and opportunities confronting investors in their pursuit of successful investment strategies has empowered and informed investors to devise novel approaches to capitalizing on market opportunities and generating returns.
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In this article, we will take a look at 13 Countries with the Best Citizenship by Investment Program in the World. You can skip our detailed analysis and go directly to the 5 Countries with the Best Citizenship by Investment Program in the World.
The growing trend of increased international mobility has fueled the desire to expand not only one’s cultural experiences but also financial ones. With the evolving dynamics of dual citizenship, the appeal for acquiring a second citizenship has intensified, prompting individuals to explore viable options. This is particularly true for investors and high-net-worth individuals. Citizenship-by-investment programs offer one such method, creating a win-win situation for all parties involved. By investing in the host country’s economy, investors can secure a second citizenship and passport, while the host country benefits from the influx of foreign direct investment, thereby strengthening its economy.
Citizenship By Investment Programs: Host Country Advantages
Citizenship-through-investment programs have experienced increasing popularity over time. According to the Investment Migration Council, approximately 5,000 individuals are granted citizenship through investment, annually. It is estimated that citizenship and residence by investment programs contribute between 2% and 30% to the GDP of the host country. The European Parliament Research Service reported earnings of 9.2 billion euros from 2008 to 2018 through investment programs. Similarly, other regions have also reported impressive revenue generation. For instance, Vanuatu earned $40.5 million from citizenship-by-investment programs from January 2022 to June 2022.
In 2022, approximately 1,375 applications were submitted for citizenship through investment programs in the three most sought-after Caribbean Islands—Antigua & Barbuda, Saint Lucia, and Grenada. While the 2019 pandemic initially dampened the upward trend, its reversal led to a subsequent revival. However, even in the face of the pandemic, revenues from the investment programs in 2019 exceeded those of 2018 for most countries. Notably, Turkey’s citizenship-by-investment program generated US $1,343 million in 2019, compared to $106 million in 2018, and the country issued the highest number of passports in citizenship-by-investment programs—9,962. Similarly, revenues for other countries, such as Vanuatu ($105 million), Antigua and Barbuda ($99 million), and Grenada ($61 million), also surpassed their 2018 figures in 2019.
Citizenship By Investment Programs: Financial Allure for Investors
In contemporary times, acquiring second citizenship offers numerous benefits. One key advantage is the enhanced sense of security that comes with being a national of two or more states. Additionally, the concept of visa-free global mobility has taken on new significance, proving to be particularly advantageous for investors. Beyond that, individuals can enjoy various tax benefits and increased opportunities for business advancement, as well as personal development through an improved quality of life, encompassing education and healthcare.
It is, therefore, unsurprising that a growing number of millionaires are seizing this opportunity. According to Henley & Partner, the number of millionaires relocating to another country reached 128,000 by 2024, a substantial increase from 51,000 in 2013. Notably, 6,705 Americans renounced their citizenship in 2020 to move to other countries, with tax avoidance emerging as a primary motivation for some of these millionaires.
Given this need for better finances, it is not surprising that companies like Intuit Inc. (NASDAQ:INTU) and Broadridge Financial Solutions, Inc. (NYSE:BR) have gained significance for entrepreneurs. Intuit Inc. (NASDAQ:INTU) is a multinational business software company that provides top-notch financial software services. Here’s what Baron Fintech Fund had to say about Intuit Inc. (NASDAQ:INTU) in their fourth quarter 2023 investor letter:
“Intuit Inc. (NASDAQ:INTU) is the leading provider of accounting software for small businesses and tax preparation software for individuals and tax professionals. Shares increased after the company reported quarterly financial results that exceeded Street expectations, with 15% revenue growth and 49% EPS growth. Intuit is benefiting from the sale of higher-value services and is well positioned to capitalize on increasing adoption of artificial intelligence (AI) given its vast data sets. The company recently launched Intuit Assist, a generative AI-powered digital assistant that improves productivity and unlocks valuable insights for customers. We continue to own the stock due to Intuit’s strong competitive position and numerous growth opportunities.”
Broadridge Financial Solutions, Inc. (NYSE:BR) is a leading provider of investor communication and helps financial services firms by providing technology-driven solutions, including tax reporting services. Continuously upgrading their solutions, Broadridge Financial Solutions, Inc. (NYSE:BR) has recently introduced NYFIX Fill Matching platform, aimed at helping high asset managers with high volumes.
Methodology
In order to compile our list for 13 Countries with the Best Citizenship by Investment Program in the World, we start off by scouring through various sources to extract citizenship by investment programs being offered around the world. We then used our article 10 Cheapest Residency or Citizenship by Investment Programs in Europe, as well as other sources, to find and rank these countries according to the minimum required investment and the time to citizenship. We then further check their political stability and absence of violence/terrorism percentile rank from The World Bank databank, 2022 and rank our selected countries according to those scores. We also use Human Development Index Ranking, 2022. To present a consolidated final ranking, we average the ranks for the four metrics on the weighted-average concept, with cost awarded the highest rank (0.5), followed by time (0.3) and then equal values for the other two metrics (0.1 each). We also talk about The Henley Citizenship Program Index, 2024 scores and rankings for these countries.
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Now that we have made a thorough analysis, we present to you 13 Countries with the Best Citizenship by Investment Program in the World.
13. Austria
Minimum Investment Rank: 13
Time to Citizenship Rank: 6
Political Stability Rank: 6
Human Development Index Rank: 2
Insider Monkey Weighted-Average Ranking: 9.4
Austria’s citizenship-by-investment program stands out as one of the initiatives requiring a significant investment in either joint ventures or direct business investments, with the goal of creating jobs and fostering new export sales. The selected businesses are expected to possess an international reputation and demonstrate growth potential. Under this citizenship program, the minimum required investment is €2 million, with the possibility to invest up to €10 million. The application process typically takes 24 to 36 months.
While the investment required is indeed substantial, the benefits of obtaining Austrian citizenship are manifold. Austria, being a politically stable, safe, and developed nation, offers a high quality of life to its citizens. Austrian passport holders enjoy the privilege of visa-free travel to approximately 190 countries and the freedom to reside anywhere within the European Union and Switzerland. Notably, Austria holds the 2nd position on the Henley and Partner Citizenship Program Index for 2024, achieving top scores in attributes such as quality of life, visa-free travel, residence requirements, and relocation flexibility. It’s essential to note, however, that except for certain specific cases, acquiring Austrian citizenship entails renouncing one’s previous nationality.
12. Jordan
Minimum Investment Rank: 12
Time to Citizenship Rank: 4
Political Stability Rank: 3
Human Development Index Rank: 9
Insider Monkey Weighted-Average Ranking: 8.4
As a Middle-Eastern nation offering citizenship through investment, Jordan presents a unique opportunity for investors seeking to establish strong ties with the country and capitalize on lucrative economic prospects. Geographically situated between Asia, Africa, and Europe, Jordan provides a secure, politically stable, and business-friendly environment for potential investors. The minimum investment required is US $750,000, directed towards a productive economic sector project located outside of Amman, which should generate at least 10 jobs for Jordanians. Citizenship is typically granted within a span of 3 to 6 months, with a higher likelihood of approval within the shorter timeframe. The program extends to the individual investor and their immediate family members, encompassing children under 18, widowed or divorced daughters, as well as parents.
The citizenship of this Middle-Eastern country opens doors to numerous opportunities, particularly as it grants citizenship in a region known for its stability and safety, coupled with visa-free travel to 50 destinations. According to the Henley and Partner’s Citizenship Program Index for 2024, the country is ranked 6th overall. The program received a higher score for processing time, residence requirements, and physical visit requirements. In summary, Jordan emerges as one of the countries offering one of the best citizenship programs in the world.
11. Malta
Minimum Investment Rank: 11
Time to Citizenship Rank: 7
Political Stability Rank: 8
Human Development Index Rank: 1
Insider Monkey Weighted-Average Ranking: 8.2
Citizenship through investment in Europe has become increasingly common in contemporary times. While the aforementioned Austrian citizenship is also European, the high associated costs can sometimes be beyond the reach of certain individuals. Malta, however, offers an alternative with a slightly more accessible investment requirement. The process involves a minimum donation of €600,000 to the National Development and Social Fund, securing a minimum residence of 36 months through the Malta Citizenship for Exceptional Services by Direct Investment program. Additionally, applicants have the flexibility to include family members, extending eligibility to include grandparents.
Ranked among the top 25 countries on the Human Development Index and recognized for its political stability, Malta offers a high quality of life for its residents. With the privilege of visa-free travel to over 180 destinations, Malta stands at the pinnacle of Henley & Partner’s Citizenship Index, boasting the highest scores in various aspects, including visa-free travel, compliance, and relocation flexibility.
10. Cambodia
Minimum Investment Rank: 9
Time to Citizenship Rank: 3
Political Stability Rank: 9
Human Development Index Rank: 5
Insider Monkey Weighted-Average Ranking: 7.1
As one of the rapid citizenship programs, Cambodia offers investors the opportunity to acquire citizenship by making a minimum donation of approximately US $320,000, including fees, to the Royal Government. The country boasts beautiful scenery, rich heritage, and friendly people. Citizenship can be obtained in a relatively short period, typically within 3-4 months. While passport holders from Cambodia enjoy visa-free travel to 53 countries, the nation maintains a politically stable environment. Notably, Cambodia secures the 9th position in the Henley & Partner Citizenship Index, earning high scores for residence and physical visit requirements. It also makes to the 10th position in our list of countries with the best citizenship by investment program in the world.
9. Turkey
Minimum Investment Rank: 10
Time to Citizenship Rank: 4
Political Stability Rank: 1
Human Development Index Rank: 3
Insider Monkey Weighted-Average Ranking: 6.6
Turkey’s citizenship-by-investment program stands as one of the most renowned programs globally. Since the reduction of their minimum investment requirements in 2018, over 13,000 investors and their families have seized this opportunity. The program offers a diverse range of options, with the minimum required investment set at $400,000 in real estate. This investment must be maintained for a minimum of three years after obtaining citizenship. The citizenship application process typically takes 3-6 months and extends to family members, including children below 18 years or children of any age with disabilities.
This citizenship offers numerous benefits, including visa-free travel to over 110 countries and access to a financially sound, stable, and safe country with a high quality of life. The investors can also become eligible for E-2 Investor Visa for the US after being domiciled in Turkey for three years. Turkey holds the 5th position on the Henley & Partner Citizenship Index, boasting high scores in physical visit and residence requirement rules.
8. Saint Kitts and Nevis
Minimum Investment Rank: 7
Time to Citizenship Rank: 4
Political Stability Rank: 9
Human Development Index Rank: 6
Insider Monkey Weighted-Average Ranking: 6.2
As the world’s first formal citizenship-through-investment program, Saint Kitts and Nevis has welcomed numerous investors since its establishment in 1984, offering them the opportunity to become residents of one of the most beautiful Caribbean Islands. The program remains a top choice for many investors, naturalizing over 1,000 investors and their families annually. Among its two investment options, the minimum-cost route involves a US $250,000 investment in a Sustainable Island State Contribution. Citizenship can be attained in approximately 3-6 months.
Citizenship in Saint Kitts and Nevis offers a multitude of benefits, including visa-free travel to approximately 157 destinations, the inclusion of family members such as parents and dependents, and the option of citizenship by descent for future generations. The country holds the 4th position in the Henley & Partner Index, earning high scores in the physical visit and residence requirement categories.
7. Egypt
Minimum Investment Rank: 7
Time to Citizenship Rank: 5
Political Stability Rank: 1
Human Development Index Rank: 8
Insider Monkey Weighted-Average Ranking: 5.9
Considered one of the world’s newest citizenship-through-investment programs, Egypt offers investors five different options. The option with the minimum investment involves making a non-refundable contribution to the CIU account in the central bank of the country, totaling US $250,000. The process for obtaining citizenship typically takes 6-9 months.
Ranking high on the political stability index, Egypt offers a rich cultural experience within the Middle East. Residents can enjoy visa-free travel to 51 destinations. The country secures the 6th place in the Henley & Partner Index, scoring notably high on various attributes, including travel destinations, compliance, process time, and physical visit, as well as residence requirements. It is thus, no surprise that Egypt is one of the countries with the best citizenship by investment program in the world.
6. Grenada
Minimum Investment Rank: 5
Time to Citizenship Rank: 4
Political Stability Rank: 12
Human Development Index Rank: 4
Insider Monkey Weighted-Average Ranking: 5.3
Grenada has emerged as a popular choice among investors seeking citizenship through investment programs. With a stable economy and political environment, the country offers lucrative options for investors. The minimum investment entails a donation of US $150,000 to the National Transformation Fund for a single applicant, with citizenship available in 3-6 months.
This investment option in Grenada comes with various benefits. Investors have the opportunity for an E2 visa for the US, thanks to the country being a signatory to the United States E2 Treaty. Grenadian citizens can also enjoy visa-free travel to over 140 countries, transfer their citizenship to future generations, and include family members such as parents and grandparents. The program’s appeal is reflected in Grenada’s 3rd position on the Henley & Partner Index, where it scored high on various attributes.
Click to continue reading and see our 5 Countries with the Best Citizenship by Investment Program in the World.
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Disclosure: None. 13 Countries with the Best Citizenship by Investment Program in the World is originally published on Insider Monkey.
One of Andrew Hawkins’ biggest regrets as an investor was that he didn’t push harder several years ago to buy the sneaker blog that eventually became StockX, the online resale platform that has been valued at nearly $4 billion.
Hawkins, a former NFL wide receiver, connected with Josh Luber, the creator of the website, which was then called Campless, and pitched turning it into a business. But Hawkins says he got distracted by his football career and before he knew it Dan Gilbert, owner of the NBA’s Cleveland Cavaliers, bought it and later turned it into StockX.
“I was so upset,” Hawkins said. “But I can pick a winner, that was the ultimate lesson.”
The 37-year-old Hawkins is now the co-founder of the sports technology and gaming startup StatusPro. The company debuted its first virtual reality game, NFL Pro Era, in 2022 and recently closed a $20 million funding round led by GV, formerly known as Google Ventures. The company plans to expand into making VR games for other sports, including boxing, baseball and tennis.
Retired NFL player @Hawk says he didn’t spend his first paycheck because he was afraid there wouldn’t be another one.
He also tells us about missing out on being one of the first investors in @stockX https://t.co/4L3YKjiQKB pic.twitter.com/iKEDlbY1PN
— Bloomberg (@business) March 7, 2024
Hawkins recently spoke to Bloomberg about his other investment stories and lessons learned.
When you got your first big NFL paycheck how did you spend it?
I put it away. I didn’t spend it because I was nervous there wasn’t going to be a second paycheck. So I literally went to the bank, and I thought to myself if they cut me tomorrow, now I have about $15,000 that I can get a good start at a new life.
And when did you feel like you had made it?
I don’t think I’ve ever felt like I made it. And that can be a good and a bad thing. But I do think it keeps me hungry and keeps me continuing to push to do new things.
Let’s go back to your regrets about StockX. What did Luber say to you after he sold to Gilbert?
He circled back and said: ‘Hawk you were one of the first people that came to me with this as a business. I want to let you be one of the first investors.’
I was so upset I had it taken from under me I didn’t invest.
Is there something you invested in that you wish you didn’t?
Yes. I won’t call them out specifically, but there was a media company that I invested in. It was a great proposition.
Ultimately, what I learned in that moment as an investor is you have to be very, very sure that there is a culture and ideology that aligns with the idea, that they can execute it.
The housing market has been an arduous one for many homebuyers, as the combination of high mortgage rates, soaring home prices and lack of inventory has paved a difficult road to homeownership.
The numbers speak for themselves: a new Realtor.com analysis found the market is still missing up to a whopping 7.2 million homes — the result of more than a decade of underbuilding relative to population growth. And in certain areas of the country, high demand for lagging housing is even more pronounced, making prices skyrocket even more.
The Realtor.com report found that many sunbelt metro areas grew faster than home permitting activity. Hannah Jones, senior economic research analyst at Realtor.com, said in the past five years, high demand in sunbelt metros put pressure on available inventory, leading to buyer competition and price growth.
“New construction struggled to keep up with rapid population growth in these popular locales, which contributed to limited inventory and steep prices,” said Jones. “Sunbelt metros saw a boom in popularity during the pandemic, which made it challenging for construction to keep up with demand.”
Jones added that high prices and mortgage rates mean many would-be buyers can no longer afford to purchase a home in these areas. “Softened demand could give inventory a chance to recover, which would take some pressure off of prices,” she said.
The Daytona metro area saw household formations outpace permitting activity by the widest margin among the largest U.S. metros. According to Jones, “This means that new construction activity failed to keep up with population growth. As a result, inventory remained 12.6% below pre-pandemic levels in January 2024, and prices were 48.4% higher.”
In addition, the Palm Bay metro area saw a similar situation play out as Daytona over the last five years. Jones noted that “population growth outpaced construction activity over the last decade, resulting in significant price growth and inventory depletion.’ These markets saw significant attention during the pandemic, which made it even more difficult for construction activity to keep up with demand.
Here are the top seven Sunbelt metros where homes increased the most:
Deltona-Daytona Beach-Ormond Beach, Fla.
- Median Listing Price Change (Jan 2024 vs. Jan 2019): 48.4%
- Jan 2024 Listings vs. 2019: -12.6%
San Antonio-New Braunfels, Texas
- Median Listing Price Change (Jan 2024 vs. Jan 2019): 17.7%
- Jan 2024 Listings vs. 2019: 15.2%
Palm Bay-Melbourne-Titusville, Fla
- Median Listing Price Change (Jan 2024 vs. Jan 2019): 38.8%
- Jan 2024 Listings vs. 2019: -14.8%
Stockton, Cali.
- Median Listing Price Change (Jan 2024 vs. Jan 2019): 41%
- Jan 2024 Listings vs. 2019: -50.6%
Riverside-San Bernardino-Ontario, Cali.
- Median Listing Price Change (Jan 2024 vs. Jan 2019): 46.6%
- Jan 2024 Listings vs. 2019: -48.6%
Bakersfield, Cali.
- Median Listing Price Change (Jan 2024 vs. Jan 2019): 56%
- Jan 2024 Listings vs. 2019: -42.1%
Miami-Fort Lauderdale-Pompano Beach, Fl.
- Median Listing Price Change (Jan 2024 vs. Jan 2019): 44.7%
- Jan 2024 Listings vs. 2019: -36.4
Jones noted that despite high costs, the market is expected to ease this year, with mortgage rates predicted to decrease. Therefore, housing could get slightly more affordable. “Many undersupplied markets have seen prices climb high enough that buyer demand has eased, which could take some pressure off of prices and improve affordability conditions,” she concluded.
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Real estate as an asset class has long been a mainstay for investor portfolios, both small or large. While it has mostly been focused on residential real estate, the turn of the century brought in another sub-asset class in the form of commercial real estate, which became the go-to product for high net-worth individuals (HNIs), since the rental yields were far higher than residential real estate.
However, the large ticket size meant that the asset class was always exclusive to HNIs or institutional investors. Over the last half a decade, with the advent of tech platforms and listing of Real Estate Investment Trusts (REITs), this asset class has become more accessible to the general public due to smaller ticket sizes in which investors can invest. In order to further stimulate the growth of this asset class, SEBI plans to introduce MSM REITs – a new way to invest into commercial real estate.Also Read: MSM REITs: How SEBI’s game-changing move will transform India’s real estate investment landscape
What are REITs and why is there a need for MSM REITs?
In simple terms, REITs own a portfolio of commercial properties and investors can purchase units of REITs to gain exposure to this portfolio. Similar to investing in units of a mutual fund scheme, investors gain exposure to the portfolio of assets the scheme owns. REITs manage those properties and collect rentals from the tenants occupying them, which is further distributed to its investors.
Currently, there are four listed REITs in India, 2 sponsored by top developers namely Embassy REIT and Mindspace REIT and 2 sponsored by investment managers namely Brookfield REIT and Nexus REIT. Each of these 4 REITs have a diversified portfolio of underlying properties across Tier 1 and Tier 2 cities in India.
However, certain investors want to gain exposure to specific assets, where they know the entire characteristics like the property, tenant, lease structure, yield profile etc. This is where MSM REITs will enable investors to make property specific investments. Extending our example of regular REITs being equivalent to owning units of a mutual fund scheme, MSM REITs can be thought of as being equivalent to owning a share of a single company. It would allow investors to create their own customized portfolio based on their own unique requirements, just like investors can create their own portfolio by picking up shares in multiple stocks.Also Read: Are real estate investors keen on fractional real estate? 3 experts share insights
How can one find the right MSM REIT to invest in?
An investor should understand and research extensively the underlying asset held by a MSM REIT. To get an investor started on the research, have listed a few parameters which an investor should look for:
Quality and location: These two are arguably the most important features, which an investor needs to assess before investing as the best quality tenants occupy the best buildings in the best locations. Therefore, it is important to visit the asset physically, which enables the investor to ascertain the asset quality as well as the surrounding micro-market.
Grade A properties are usually located in Central or Secondary Business Districts of the city. They come with quality amenities, impressive lobbies, LEED or IGBC certification, high ceiling heights and are built by Grade A developers. In case an investor is unable to visit physically, the location of the building along with the quality of the developer and tenant (like Fortune 1000 or Indian top 100 companies) can serve as a good proxy to assess the quality and location.
Lease structure: In a typical commercial lease, the tenant has lock-in for only a small duration of the lease (3-5 years), while the landlord is ‘locked-in’ for the entire lease period (5-15 years). During the lock-in period, the party which is ‘locked-in’ can’t terminate the contract. An attractive MSM REIT would be one in which the remaining lock-in period is at least 2-3 years and the remaining lease period is at least 5 years.
Moreover, it is important to also understand who has invested in the fit-outs. One should prefer an asset where the fit-outs are done by the tenant, as that improves the stickiness of the tenant and reduces the chance of vacation by the tenant.
Demand/supply dynamics: A good quality asset with a good tenant, has to be understood along with the expected demand and upcoming supply in the location. When compared to the demand, if a micro-market sees a much larger upcoming supply, it pushes the vacancy higher, which puts a significantly downward pressure on the rentals as it gives the bargaining power to the tenants to renegotiate the rents.
Hence, an investor should look for markets which have a vacancy below 10% and favorable demand and supply characteristics. The vacancy and demand/supply data are published regularly by research teams of large IPCs (International Property Consultants) like JLL, CBRE and Knight Frank which can be a good starting point for research.
Management quality: The performance of a MSM REIT will be heavily influenced by the quality of its management team. Poor decision-making, lack of experience, or ineffective property management can impact returns. Therefore, an investor is advised to invest in a MSM REIT, whose management team has a proven track record in investing and exiting assets.Also Read: Real estate dominates Indian household savings with highest allocation: Report
Is diversification necessary in MSM REITs?
Just like in any other investment, diversification is important in MSM REITs as well. However, the diversification will now be under the control of individual investors. We have suggested a couple of ways in which an investor can diversify:
Based on asset class: As the industry matures, there will be MSM REITs available across multiple asset classes like office, retail, warehousing, industrial, hospitality, etc. An investor should be able to invest in assets across all of these and benefit from the upward movements of any particular asset class in a cycle. For example, we are beginning to see asset class diversification in regular REITs as well – the first three REITs to be listed were office, post which the first retail REIT got listed last year. MSM REIT can also be expected to follow a similar trend.
Based on geography: Another way to diversify would be investing across multiple cities and minimizing the city risk at a portfolio level. In fact, this risk is present in some of the listed REITs as well. For example, embassy REIT has a significant majority of its portfolio in Bangalore. Having this flexibility to diversify, would allow the investor to pick and choose markets with strong fundamentals like low vacancy and consistent rental growth.
What are the risks involved?
Like any other financial investment, the MSM REITs will come along with its own set of risks which an investor must be aware of before investing. Some important ones are listed below:
Tenancy: Given that the MSM REIT will have only a single or maybe a handful of tenants, the risk of the tenant vacating the property will always be there. To mitigate this, we recommend investors to conduct a thorough research about the market, tenant, as well as the lease structure. Diversifying across multiple MSM REITs will reduce this risk over time as it is unlikely that all of the tenants vacate at the same time.
Interest rate: Similar to any yield oriented product, MSM REITs also have an underlying interest rate risk. When interest rates go up, an investor would expect higher yield as safer investments like FDs and government bonds start offering higher returns. This leads to fall in REIT prices as prices move inversely to yields.
Liquidity: As MSM REITs are expected to be listed on stock exchanges, they will be much more liquid as compared to a direct real estate investment. However, in times of market stress, it may be challenging to sell MSM REIT units at a desired price, just like a regular REIT. Investors can mitigate this risk by allocating capital for the long term (over 4-5 years).
MSM REITs vs. Regular REITs
A key point to note is the difference in the ticket size. While regular REITs have a ticket size of only one unit (having unit size of less than Rs. 400), MSM REITs are expected to have a minimum ticket size of Rs. 10 lakhs. This large ticket size is to ensure that investors perform thorough research before investing given the nascent stage of the industry. However, as time progresses, the ticket size restriction may be relaxed, similar to the way minimum ticket size in REITs was reduced to one unit from Rs. 2 lakhs initially.
In conclusion, MSM REITs will present a unique opportunity to invest in rent generating commercial assets. For investors who want to choose the assets and micro-markets they invest in, it will reduce the minimum ticket size. Moreover, for the developers and holders of institutional asset managers, it will allow them to bring those assets to market, which were earlier too small for regular REITs and too big for HNIs, thereby providing further boost to commercial real estate.Kunal Moktan is CEO and Co-founder, Property Share.
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This opportunity is projected to provide investors with strong returns and help build long-term wealth through investing in value-based, community-oriented real estate developments.
MINNEAPOLIS, February 27, 2024 (Newswire.com)
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Centra Capital Partners is proud to announce its inaugural project, The Meadows at Hugo, is now open to the first wave of fundraising. Centra Capital Partners is designed to provide investors unique opportunities to invest in individual real estate projects with an initial focus on residential housing in the Minneapolis area.
The Meadows at Hugo is in a growing community just outside the Minneapolis-St. Paul metro. It includes an 87-lot, single-family home ground-up development offering great schools, abundant open spaces, paved trails and numerous lakes. With a projected IRR exceeding 17% and an attractive 8% preferred return, this project stands out as a testament to Centra’s commitment to delivering value to investors.
“No one wants to wait 6-8 years to see if their investment will perform. This project has the potential for investors to see gains within the first two years,” says Dale Wills, CEO and founder of Centra Capital Partners.
The National Association of Realtors states that historically, a six-month supply of homes is associated with a moderate price appreciation. As of January 2024, supply is at just 1.7 months in the Twin Cities. The Twin Cities region is a growing market, with 657,000 people expected to move to the area between 2020-2050. Wills remarks, “Now is a great time to be investing in real estate in Minnesota. There’s a huge need for housing and Centra has the knowledge and manpower to bring those homes to market quickly and efficiently.”
Centra Capital Partners is a new branch of Centra Companies, a trusted name in the construction and real estate development industry. Centra has a proven track record of success with more than 1,500 homes built and $500MM+ in project value to date. With more than 120 years of combined real estate experience, the Centra team has learned how to improve processes, focusing on lean operation practices, to deliver superior results to its stakeholders.
The Centra Capital Partners team plans to provide up to six unique real estate investment opportunities in 2024, the second one being a new 110-unit detached townhome development in the city of Ramsey called Waterfront Village. Interested investors can invest in these projects or schedule a call for more information by visiting the Centra Capital Partners website.
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About Centra Capital Partners:
Centra Capital Partners creates thriving communities across the United States by partnering with accredited investors to build long-term wealth in value-based, community-oriented real estate developments. The Centra Capital Partners team has more than 120 years of combined real estate experience, making it a trusted partner in the real estate development industry. Its “investor-first” approach, commitment to transparency in all aspects of operations and long-term vision allow it to maximize investor returns while protecting its partners’ investments.
Source: Centra Capital Partners
Shelby Davis, the visionary investor and creator of Davis Funds, has gained legendary status for his adherence to a value-driven investment strategy and commitment to a long-term investment philosophy. Noteworthy similarities exist between Shelby Davis’ investment strategy and the present market conditions.
At the age of 38, Shelby Davis initiated his investment journey with $50,000. Over time, he accumulated a wealth of $900 million, securing a position among the Forbes 400 wealthiest individuals before his passing at the age of 85 in 1994. Here are a few valuable investment insights that we can glean from his experience:
Emphasize value-based investing: Davis advocated for acquiring stocks priced below their intrinsic value. This involved a thorough examination of companies, seeking those with robust fundamentals like consistent earnings growth, a formidable competitive edge, and a stable balance sheet.
Exercise patience: Davis, as a proponent of long-term investing, upheld the practice of retaining stocks for extended periods, even if their values experienced short-term declines. Recognizing the cyclical nature of the stock market, he acknowledged that, over time, sound companies would ultimately witness their stock prices align with their genuine worth.
Manage your emotions: Recognizing the susceptibility to market emotions like fear and greed, Davis emphasized the importance of maintaining discipline. He counselled investors to adhere to their investment plans, especially during periods of market volatility.
Don’t fall for high-flying stocks: The strategy of “buying stocks at any price” is flawed and, in the long run, unsustainable. It is imperative to engage in investing with a more nuanced and disciplined approach. Paying above a company’s intrinsic value exposes you to potential losses if the price adjusts to align with actual worth. Concentrating solely on hype or short-term trends disregards essential factors such as the company’s financials, business model, and competitive landscape.
Make debt work for you: Leveraging debt has the potential to enhance returns. When employed judiciously, borrowing funds for investments can amplify gains, potentially expediting the accumulation of wealth. Davis achieved success by adeptly identifying undervalued stocks and generating returns that surpassed the interest on his borrowed capital.
Write regularly to think better: Contemplating thoughts in our minds can be nebulous and disorganized. Transcribing them onto paper compels us to express ideas, recognize connections, and arrange them coherently. This method fosters a more profound comprehension and unveils any potential gaps or inconsistencies in our thought process.
Invest in three steps: Getting entangled in the pursuit of quick “Earn” or “Return” is tempting, yet overlooking the foundational elements can result in challenges and overlooked opportunities in the future.
The importance of the learning phase is frequently underestimated, as individuals often hurry into the “Earn” stage without establishing a robust knowledge foundation. This hasty approach can result in suboptimal decisions, time squandering, and frustration. Achieving proficiency in intricate skills is a gradual process that demands time and unwavering dedication. It’s not a sprint; rather, it’s a marathon that necessitates persistent effort and patience.
Start investing early in life: Although initiating investments early is commonly perceived as beneficial, the case of George Davis investing later in life illustrates that substantial wealth can still be built, even with a delayed start. Despite commencing later, persistent and intelligent investing can leverage the power of compounding over time. If Davis managed to attain a notable average annual return, initiating investments at the age of 38 could have led to a substantial nest egg by the time of his demise.
Broaden your portfolio: Despite being a proponent of value investing, Davis underscored the significance of diversifying your portfolio across various asset classes and sectors. This strategy serves to mitigate risk and enhances the likelihood of realizing your long-term investment objectives.
Davis achieved success with his investment strategy, delivering substantial returns for his investors throughout his extensive career. Nevertheless, his approach comes with inherent risks. Value investing poses challenges, demanding a considerable amount of patience and discipline. Furthermore, the use of leverage can amplify both gains and losses, adding a layer of complexity to the strategy.
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HSBC’s global banking and markets unit jumped 8% last year as the UK lender increased fees from dealmaking and maintained trading revenue in most asset classes.
The UK lender posted revenue of $16.1bn for its global banking and markets unit last year, according to its annual accounts. Fees from capital markets and M&A work surged 36%, with HSBC’s investment bank benefiting from a resurgence in debt underwriting revenue.
HSBC’s pre-tax profit of $30.3bn for 2023 was a record for the bank and an increase of 78%, but still below the $34bn expected by analysts. In a statement, chief executive Noel Quinn said that the results “reflected four years of hard work and the strength of our balance sheet in a higher interest rate environment.”
HSBC finished 16th in the investment banking fee league tables last year, according to data provider Dealogic, with 1.3% share of the market. This is up from 17th a year earlier.
The UK lender’s markets and securities services business posted revenue of $9bn, which was largely in line with 2022. However, equity trading fees of $552m were nearly half of the $1bn it earned in the unit in 2022.
HSBC’s GBM business dipped 4% in the final quarter of the year to $3.7bn.
READ HSBC hikes bonuses to $771,700 for its top investment bankers
HSBC has bolstered its UK investment bank over the past year, hiring two senior dealmakers for corporate broking in July, but faces stiff competition from Barclays, which is aiming to consolidate its first place finish in the UK dealmaking fee league tables last year. In recent months, hires within its investment bank have focused on its core markets of China and the Middle East.
Investment banks have struggled against an ongoing drought in deals, with Wall Street banks and Europeans alike posting sharp declines in M&A fees in 2023. UK rival Barclays unveiled a 12% decline in investment banking fees for 2023, led by a 23% slump in revenue from M&A work.
Barclays also unveiled its first investor day since 2014, separating its business into five key units including separating its investment bank from its corporate bank. While the UK lender will look to reduce its reliance on its investment bank, it is not pulling back and within its dealmaking team intends to shift the balance away from debt underwriting to do more M&A and equity capital markets work.
Deutsche Bank’s origination and advisory business was up by 25% in 2023, buoyed by a rebound in debt capital markets activity as its M&A unit slipped 25%. A hiring spree of 50 managing directors at the German lender last year aims to shift the balance of its investment bank towards more M&A and equity capital markets work.
To contact the author of this story with feedback or news, email Paul Clarke
The biggest Wall Street banks cut 30,000 jobs last year, kicked off by Goldman Sachs who informed its staff of plans to make its deepest reductions since the 2008 financial crisis shortly after Christmas 2022.
Goldman’s 3,200 job cuts were swiftly followed by 3,500 at Morgan Stanley, and then 5,000 at Citigroup. Bank of America refrained from deep redundancies, but 4,000 employees departed regardless through its ‘natural attrition’ approach last year.
With the exception of Credit Suisse, which started cutting thousands of roles before being acquired by its biggest rival UBS in March, European banks refrained from deep redundancies last year.
Times have changed.
Whether it’s an attempt to revive a flagging share price, free up funds for buybacks, the march of technology, strategic overhauls or simply reining in costs, top European banks are cutting jobs and reducing bonuses for those that remain.
READ ‘Doughnuts’ loom: Bankers brace for brutal bonus season
“It’s a balancing act for a lot of European banks, particularly after two years of poor performance for investment banking. There’s only so long you can keep paying expensive talent in the hope that revenue will recover,” said Gary Greenwood, a bank analyst at Shore Capital.
Barclays is expected to unveil a strategic overhaul alongside its annual results on 20 February, with the UK lender looking to save £1.25bn in costs. So far, job cuts have mainly hit support functions. Deutsche Bank said that 3,500 jobs will go over the next year, largely in back office functions, as it looks to save €2.5bn after headcount swelled 6% in 2023.
Societe Generale is cutting 900 jobs within its Paris headquarters as part of new CEO Slawomir Krupa’s plans to pull back on costs, while UBS has earmarked around $6.5bn in employee expenses to be stripped out as it integrates Credit Suisse.
On a smaller scale, Rothschild cut around 10 investment banking jobs in January, with former Goldman dealmaker John Brennan departing.
“The US banks are much more reactive in terms of cutting headcount than their European counterparts,” said Stephane Rambosson, co-founder of headhunters Vici Advisory. “European banks are now focused on costs, but each case is specific to their circumstances rather than market conditions. Wall Street banks are also quicker to hire again when the tide turns.”
As well as job cuts, bankers are enduring another brutal bonus round. There is widespread disgruntlement at UBS as the bank spread an already small pool around its existing employees, the influx of Credit Suisse staff and a flurry of senior Barclays dealmakers brought in last year on guarantees, according to bankers.
Barclays has handed zero bonuses to up to a third of dealmakers in some units, bankers told Financial News, with Bloomberg previously reporting that “dozens” of employees were set for doughnuts this year. Deutsche Bank, which also has to digest an expensive hiring spree and its £410m acquisition of City broker Numis, is also set to reduce bonus payments.
READ Investment banks face talent crunch even after deep job cuts
“We have observed a similar, but even more aggressive, trend with the European banks regarding layoffs and bonus pool reductions,” said Chris Connors of Wall Street compensation consultants Johnson Associates. “The European banks have struggled to keep pace with their American counterparts on business results and compensation. From the employee perspective, we anticipate European bankers to be similarly disappointed to US bankers given the muted results in advisory and other units such as underwriting, which are still well below 2021 levels.”
While US banks cut dozens of dealmakers last year, some European players took advantage of the dislocation. Deutsche hired 50 senior bankers, while Santander picked up dealmakers from both the fallout from Credit Suisse’s takeover and from Goldman Sachs and Morgan Stanley.
Most cuts so far at European banks have focused on management or back office functions, and there’s little suggestion that deep investment banker redundancies are on the cards, particularly as banks prepare for a revival in dealmaking activity after a near two-year lull. However, headhunters told FN that many banks were taking a much more cautious approach about bringing in senior talent.
During its fourth quarter earnings call, Deutsche Bank chief executive, Christian Sewing said that the bank had “positioned ourselves for a recovery in origination and advisory” after its hiring spree. “Now, this is where we see considerable growth potential,” he added.
“Investment banking is a people business, so banks will be reluctant to let too much talent depart,” added Greenwood. “This could change — a recovery is possible, but there are still a lot of risks in the market.”
To contact the author of this story with feedback or news, email Paul Clarke