Chapter 11: Direct vs. Indirect Investment

Question 1

Compare direct vs. indirect investment (UT or ITC) in the investment of property

INDIRECT REASONS

Answer 1

1. Why invest in indirect investment
   - Gain access to a diversification portfolio of property
   - Can invest in an asset they usually cannot, due to it being large/unusual in nature.
   - Access investment expertise
   - Cost savings - economies of scale
   - Benefit from tax advantages, e.g., exception from capital gains tax
   - Suits investors with a small fund

Question 2

Compare direct vs. indirect investment (UT or ITC) in the investment of property

DIRECT REASONS

Answer 2

2. Why invest in direct investments
   - Diversification away from the equity market
   - No exposed to the additional risk from larger/unusual property
   - Control
   - Avoid charger, not paying investment managers
   - Tax advantages
   - Suits larger investors

Question 3

Compare direct vs. indirect investment (UT or ITC) in the investment of property

SYSTEMT REASONS

Answer 3

3. SYSTEMT
   S - Security

Y - Yield

• Direct: High running yield + less volatile (infrequent valuation in short-term) + can gear
• Indirect: More volatile thus compensated by a higher return

M - Marketable
Indirect: More marketable, divisible, easier to value (and less subjective) + can be used to tract an index
Direct: Higher utility value (use property)