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Is direct investment in international property markets justifiable?

Is direct investment in international property markets justifiable? This paper critically assesses the relative merits of indirect and direct methods of international property investment. Despite similarities in the underlying asset base, each offers different qualities in terms of information costs, diversification, management and transaction costs, liquidity, volatility and quality of performance measurement. It is argued that direct investment will only be justifiable where investors are confident that they have the ability to identify underpriced assets, can manage these assets as effectively as local companies and can handle the investment risks associated with such lumpy, illiquid assets. It is concluded that for many investment funds, indirect investment in specialist property investment companies would seem to offer a more suitable method of gaining exposure to international property markets. In general indirect markets are more transparent, information costs are lower, liquidity is higher (with consequent implications for portfolio asset allocation decisions) and performance measurement is less problematic. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Property Management Emerald Publishing

Is direct investment in international property markets justifiable?

Property Management , Volume 18 (1): 9 – Mar 1, 2000

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References (26)

Publisher
Emerald Publishing
Copyright
Copyright © 2000 MCB UP Ltd. All rights reserved.
ISSN
0263-7472
DOI
10.1108/02637470010311870
Publisher site
See Article on Publisher Site

Abstract

This paper critically assesses the relative merits of indirect and direct methods of international property investment. Despite similarities in the underlying asset base, each offers different qualities in terms of information costs, diversification, management and transaction costs, liquidity, volatility and quality of performance measurement. It is argued that direct investment will only be justifiable where investors are confident that they have the ability to identify underpriced assets, can manage these assets as effectively as local companies and can handle the investment risks associated with such lumpy, illiquid assets. It is concluded that for many investment funds, indirect investment in specialist property investment companies would seem to offer a more suitable method of gaining exposure to international property markets. In general indirect markets are more transparent, information costs are lower, liquidity is higher (with consequent implications for portfolio asset allocation decisions) and performance measurement is less problematic.

Journal

Property ManagementEmerald Publishing

Published: Mar 1, 2000

Keywords: International property; Direct and indirect investment; Diversification costs; Investment risk

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