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The debate on active vs passive investing has been raging for years but with no clear winner. Highly skilled active equity managers can certainly beat the market by a wide margin, more than justifying their higher fees. Just look at the long term track records of managers such as Lindsell Train, for example. But talented active equity managers are a rare breed and their performance is often volatile whereas passive funds, by definition, deliver more predictable market-like returns and come with a much lower price tag.
In recent years, passive funds have been in the ascendancy. With the rising tide of ultra loose monetary policy floating all asset prices, it has been hard for active managers to outperform. But with volatility returning with a vengeance as the monetary water starts to go out, buying the whole market with an index fund may not be smartest move. Selective stock picking is probably the more intelligent approach to this new market environment.
The same is true of today’s property market. In a world of high equity and bond prices, it’s important to retain a diversified portfolio that includes alternatives, such as real estate. But not just any real estate. With the shadow of Brexit and economic uncertainty hanging over them, neither the domestic nor the commercial real estate markets are sending a clear signal about the future direction of prices at the moment. And hidden beneath flat national averages there are huge regional variations.
For example, the Royal Institution of Chartered Surveyors (RICS) thinks prices overall will be flat this year but, within this context, predicts falls in London and the southeast and strong gains in Northern Ireland, Scotland and Wales, where it expects prices to get back to the levels seen before the financial crisis. “It is not a market but a series of markets, as surveyors keep reminding me,” says Simon Robinson, chief economist at RICS.
In such an environment, investors need to keep their wits about them and choose each property on its individual merits. It means rolling up your sleeves and digging into the details of the deal to ensure you sift the potential winners from the losers. As an independent marketplace platform, Property Crowd doesn’t make any recommendations about the attractiveness of one deal versus another. But we do strive to bring high quality deals to the market and make as much information available as possible about them to enable you make a comprehensive assessment of each opportunity. We encourage you to make full use of the market intelligence and data available in our deals rooms to determine your allocations to real estate.
Sophisticated institutional investors, such as Sovereign Wealth Funds and pension funds, are increasing their allocations to real estate but it is a slow and painful process. Unlike equities, bonds, currencies and commodities, no efficient capital market for real estate exists, which means that most real estate deals are expensive private transactions with long lead times and mountains of paperwork that remain hidden from public view. As a result, unless they are members of exclusive real estate investment clubs or consortiums, the majority of investors simply can’t access this deal flow.
A recent report from the professional services firm EY offers some hope that this may be about to change. The report highlights the fact that the real estate industry is modernising and going through a phase of institutionalisation as it formalises and standardises processes, outsources non-core activities, leverages new technology, and takes proactive steps for managing increased regulatory oversight.
“Where, in the years following the crisis, an index-style approach to investing could have generated substantial gains, the successful managers in today’s market will need to behave much more like stock pickers,” says EY. “The new environment of rising interest rates, potential falls in property values over the longer term and the emergence of distressed opportunities will require firms to take a more creative approach to investing, to hone and fine-tune their strategies and to ensure they are identifying the right assets to acquire in the right markets to fit with their risk-reward tolerance.”
While the primary market is firing on all cylinders right now, EY points in particular to a need for improvement in the functioning of the secondary market. “Secondary markets still have a little way to go as local economies have improved, creating demand for new construction, and development and distressed opportunities are starting to emerge. While there is no doubt that competition in core markets continues to intensify, especially as cross-border investment ticks up, demand for space in primary cities across the US, Europe and Asia remains high.”
At Global Alternatives, we are bringing about the development of an institutional secondary market for real estate securities by establishing a fully-regulated, cross-border infrastructure for the origination, standardisation, securitisation, placement, trading, settlement and custody of private securities. In time, we believe this online infrastructure will reduce complexity, significantly increase the market’s liquidity, and enable investors to allocate directly to real estate assets in real time and at much lower cost.
Global Alternatives, Property Crowd’s parent company, is proud to be one of the top 100+ firms selected to exhibit at the Government’s International FinTech conference in London on 22 March. The conference, organised by HM Treasury, is designed to showcase to investors the best that entrepreneurs in the sector have to offer.
Property Crowd is one of our platforms aiming to modernise the world of real estate investing. We’re building a capital markets ecosystem connecting real estate owners and asset managers with potential investors, including a fully-regulated, cross-border infrastructure for the origination, standardisation, securitisation, placement, trading, settlement and custody of private real estate securities.
Come and meet us at the event if you can. We’ll run you through our vision for the future of real estate investing!
Why are UK house prices so high, especially in London and the South East? The possible explanations are well rehearsed. For some, it’s all Mrs Thatcher’s fault. When she decided home-ownership was the only way to go in the 1980s, local authorities stopped building council houses, triggering a boom in private property prices.
More recently, it’s been argued that Nimbyism and tight planning restrictions are to blame. Indeed, this was the explanation cited by the Chancellor in his 2017 Budget. Phil Hammond promised changes to the planning system to encourage better use of land in cities and towns, meaning more homes can be built while protecting the green belt.
But a new study by housing expert David Miles, Professor of Financial Economics at Imperial College Business School, suggests that policymakers are mistaken if they think planning reforms are the only answer to Britain’s housing crisis.
Prof Miles, who is a former member of the Bank of England’s Monetary Policy Committee, argues that just as important is major investment in the nation’s crumbling transport infrastructure.
Writing on VOX, the economic policy portal of the Centre for Economic Policy Research, Prof Miles says there’s nothing unique about UK house prices rising much faster in recent decades than the prices of most other things, such as cars, food, clothes, energy and travel. It’s happened in other property hot spots such as San Francisco, Paris, Hong Kong and New York, too.
His research suggests that the rising costs of building houses are only a tiny part of the reason for the huge rise in the relative price of houses, which are three times as expensive now in the UK as they were in the early 1980s.
Increases in the cost of land are much more important, he says, but the question then is: why have land values risen so much?
“Part of that answer is connected to planning restrictions – and some people are satisfied to leave that as the answer,” say Prof Miles. “But those restrictions are not arbitrary – they are neither random nor exogenous (external to the housing market). Such restrictions exist in most countries. They are typically most binding in parts of countries where population densities and house prices have become high and they reflect underlying forces that make densities and valuations high.”
Prof Miles says that two of the most important underlying forces at work are a combination of the supply of suitable land and transport improvements. Taking a long view, he says that there was no real change in real house prices in the UK or other developed countries between the mid-19th and mid 20th centuries. This was because transport improvements and economic productivity grew together at the same pace.
But once travel improvements, such as faster commuting speeds, fell back relative to economic growth, as they have done in recent decades, house prices started to rocket. He concludes that better transport infrastructure and shorter travel times would increase how far away from the most densely populated and popular urban centre people could live, thereby reducing, though not eliminating, demand and price pressures in property hot spots.
For more progress to be made, however, it would also require the reversal of several other powerful forces underpinning house price growth, including steadily rising population and productivity growth, a general unwillingness to live in high rise flats and resistance to spending less on housing relative to other goods and services. These are all challenging problems to solve simultaneously, which suggests that, notwithstanding short-term cyclical variations, the medium to long-term secular trend for prices in popular and prosperous parts of the country remains upwards.
Ever since interest rates were slashed to avoid a depression in the wake of the 2008 financial crisis, savers have suffered from wafer thin returns on cash ISAs. Last year was the worst on record, with average returns at an historic low of 0.93 per cent, according to Moneyfacts.
Now that interest rates are heading upwards, cash ISA rates will surely improve, won’t they?
Unfortunately, that doesn’t seem likely. For a start, with growth remaining sluggish, a big rise in base rates from the current level of 0.5% is not on the cards. There are also technical obstacles in the savings market to higher returns on cash ISAs. One significant factor is the introduction of the personal savings allowance, which lets basic rate taxpayers receive their first £1000 in interest income free of tax. Higher rate taxpayers have a lower allowance of £500.
With interest rates on some taxable savings accounts already exceeding those on cash ISAs, the tax break has become less attractive. Right now, savers who pay basic rate tax can put £100,000 in a taxable account offering 1 per cent interest and will not have to pay any tax. Let’s face it, how many basic rate taxpayers have that amount of spare cash to put aside? Most will have a lot less, so why would they bother with a cash ISA when taxable accounts offer them equivalent or better tax free returns?
Another factor weighing on returns from cash ISAs has been the availability of cheap money for banks from the government through the Funding for Lending Scheme. Designed to encourage financial institutions to pass on the benefits of ultra low interest rates to borrowers rather than hoarding cash to bolster their balance sheets, the scheme has had the side effect of weakening the incentive to offer competitive savings rates in order to attract money from savers.
Given all the drawbacks of cash ISAs, it is not surprising that some savers have become stock market investors instead. However, for those who prefer a bit more security, they might like to consider an Innovative Finance ISA (IF ISA), which tends to offer higher rates of return than a cash ISA but with less volatility than a Stocks and Shares ISA.
Launched by the government in April 2016 to reflect the growing popularity of alternative finance platforms, IF ISAs have been slow to take off but are likely to gain more attention this year as more alternative finance platforms enter the market. In the past 12 months, the largest three have now been authorised by the UK regulator and are likely to begin promoting their offerings soon, resulting in a lot more visibility. With plenty of choice for investors, an uptick in inflation, and £600bn lounging in cash ISAs, the 2018 opportunity for IF ISAs is enormous.
“2018 is going to be the biggest year yet for the IFISA,” says Andy Davis, a former Financial Times journalist who has conducted research into the market for AltFi, the alternative finance news site. “There is massive ignorance out there about the IFISA … There’s a hell of a lot of education still to go.”
IF ISAs may offer attractive returns but they are not risk-free. Unlike the majority of FCA-authorised bank and building society savings accounts and Cash ISA accounts, the returns from Innovative Finance ISA (and Peer-to-Peer lending activities generally) are not protected by the Financial Services Compensation Scheme. However, while they may feel safer, cash savings accounts are not entirely risk free either. With inflation at 3%, and average interest rates on cash ISAs below 1%, real returns are negative. Savers are effectively paying banks to look after their money. Instead of receiving what they perceive as a risk-free return, what savers are actually getting is return-free risk, the risk being that of a steady reduction in the purchasing power of their hard earned savings.
By contrast, while IF ISAs can, in a worst-case scenario, mean a permanent loss of capital, managed carefully and professionally, they can deliver attractive returns that far outweigh those available in cash ISAs. Bond investments on Property Crowd are ISA eligible and deals which have gone full cycle and been redeemed have on average returned 12.77%. And, as anyone who has checked the balance in their stocks and shares ISAs since the recent big sell-off can testify, it will have delivered a much smoother return profile.
Phew! We can all relax. Fears of a stock market crash have receded. All through last year fund managers warned nervously of stretched valuations as equity markets scaled new heights. Now, surprisingly, despite markets climbing higher still since the start of the year, consensus expectations have actually become more optimistic.
The closely-watched monthly Bank of America Merrill Lynch Fund Manager Survey shows that professional investors don’t now expect a significant decline in equity markets until 2019 or beyond. As a result, the number taking out protection against a near-term correction has fallen to the lowest level since 2013, and equity allocations have jumped to a two year high.
The mood shift is hard to fathom since, apart from being one year further into the century, nothing has fundamentally changed. But the dwindling number of stock market bears is in itself a worry. Behavioural finance, a field of research that combines cognitive psychological theory with conventional economics and finance, shows that the point of maximum risk is when investors are euphoric. We’re probably not quite there yet, though some of the shenanigans on planet crypto may suggest otherwise. However, as the bull market grinds higher, it pays to keep an eye on the risks, and in particular the danger of a pick up in inflation.
High and persistent inflation eats away at the real value of investment returns over time, significantly reducing purchasing power. For example, if you invest £10,000 over ten years in bonds with an expected rate of return of 10%, your portfolio will grow to a healthy £25,937. However, if you factor in a 3% inflation rate over the same period, it will have cost you £6,638 in purchasing power, leaving you with an inflation-adjusted balance of £19,300.
There are those who argue that inflation is dead, buried by the powerful secular forces of globalisation and new labour-saving technology, which have increased price competition and reduced wage bargaining power for all but the most highly skilled. The economist Roger Bootle is one of them. Way back in 1996, he predicted that we were entering a new era of near zero inflation after the post-war period of surging price rises. He was not far wrong. Since then, through to the end of 2016, inflation in the UK has averaged just 2.8% a year, compared to 8% in the preceding 20 years. It spiked upwards last year to a peak of 3.1%, due largely to the weakness of sterling following the Brexit vote, though the latest figures for December show a decline to 3%. The consensus among economists is that inflation is now back on a downward path.
Even so, inflation is still well above the Bank of England’s 2% target; hence the precautionary increase in interest rates last year. More increases are likely in 2018, though it’s not clear how many. The problem with interest rate increases is that it takes up to two years for them to work their way through the economy. So central banks can’t wait until they can see inflation close up before tightening monetary policy; they have to act in anticipation of an increase. In other words, they have to shoot ahead of it.
The balance of probabilities implies they will have to do more monetary tightening than investors anticipate. After flooding the global economy with liquidity on an unprecedented scale to avoid a depression following the financial crisis, the global economy is enjoying a synchronised upswing and the trigger fingers of all the world’s major central bankers are getting distinctly twitchy. Even the European Central Bank and the Bank of Japan, long the most dovish about inflation, have started murmuring about withdrawing some of the monetary stimulus they have provided.
In this environment, the risks of a policy mistake either way – tightening too much too soon or too little too late – are acute. An overly aggressive response to fears of higher inflation could trigger a global recession while a failure to tighten policy sufficiently could mean that rates will eventually have to rise much more steeply to bring the rate of price increases back under control. Central banks are likely to err on the side of caution and tighten policy sooner rather than later, reasoning that they can always cut rates again if grow starts to slow too sharply.
A faster than expected increase in rates to contain inflation would do more damage to portfolios newly re-positioned for a continued bull run than would a sluggish response, at least in the short run. So what can investors do to protect themselves? They could play it safe and reduce their exposure to equities, but that might mean missing out on further potential gains. On the other hand, remaining heavily invested in equities could mean hefty losses if central banks do act more aggressively than expected.
The best response is probably not to do too much. While small tactical adjustments to asset allocations might pay off, the best thing to do is retain a long term focus and ensure that your portfolio is fully diversified across and within asset classes, including equities, bonds and property. Five new residential real-estate investment trusts have been launched in the past year, providing a range of new options to gain exposure to property. Alternatively, for those that prefer more control over their investments, Property Crowd allows you to select individual property-backed bonds which have the advantage of shorter terms and higher yields. The costs are also considerably lower than paying a fund manager to select the assets for you.
The exact origins of the phrase are unclear, but John Camden Hotten’s Slang Dictionary records it being used in the aftermath of the railway investment mania in the 1840s. At that time, it was meant to reassure investors then turning their attention back towards slower and steadier returns from property after the mauling they had suffered in the speculative frenzy surrounding the birth of mass railway transportation in Victorian England.
As with the dot.com bust in 2001 and now the cryptocurrency feeding frenzy, when the dust settled, the underlying new technology proved to be sound in the long run for sustainable businesses. Who even now questions (apart, perhaps, from long suffering season ticket holders on Southern Rail) the benefits of train travel? Sharp practices, such as misleading prospectuses, payments of dividends out of capital, and outright fraud, were the real causes of investor distress.
Wary investors opting for the relative security of real estate assets in the wake of the railway mania and holding them for the long term would certainly have been richly rewarded, quite literally, according to a new research paper from economists at the University of California-Davis, the University of Bonn, and Germany’s central bank, the Bundesbank.
The paper has meticulously documented the annual returns from all major asset classes from 1870 to 2015 in 16 developed countries, including the US, Japan, Germany and the UK. The key finding is that property comes out on top. It seems that the instinctive faith routinely placed in bricks and mortar by investors versus less tangible financial assets is entirely justified by the data.
On average, the annual returns on housing over that 150 period was just over 7% when adjusted for inflation, according to the study. This compares with just under 7% for equities and 2.5% for bonds. At the same time, the risks associated with investing in housing were lower. By standard measures of uncertainty, housing was about half as risky as equities, and slightly less than bonds.
The results contradict conventional theories of asset valuation, which suggest that higher risk assets should have higher returns to compensate for the additional risk. But they probably chime with the gut feel of many amateur investors.
Some caveats apply to the study’s findings. Notably, the results weren’t uniform across countries. The additional return from investment in housing rather than equities in France, for example, was 3.3% while in Italy and the US, equities actually did better than housing. And, of course, there were periods within the last 150 years when equities beat housing in aggregate across the 16 countries.
Since 1980, for example, the annual return on equities was 10.7%, compared to 6.4% for housing due to the post-1990 house price collapse in Japan, slow growth in Germany after unification, and the offsetting explosion in equities in the Nordic region. Yet, even since 1980, housing did better on a risk-adjusted basis, according to the study. The Sharp ratio, which compares an investment’s excess return above the risk free rate to its standard deviation of returns, was more favourable for housing in 14 of the countries examined.
The study’s findings also don’t fully account for property taxes, which vary significantly between countries and could skew the risk and return numbers in either direction, but they nevertheless provide some hard evidence that real estate has a key role to play is asset allocation decisions. As with any other asset class, returns from property won’t always rise in a straight line; there will always be periods of underperformance and variations in returns between countries. But, as a long term investment, it really does seem that a diversified portfolio of housing assets is as secure as the proverb suggests, particularly if prevailing business models can be adapted to introduce more flexibility. Investing in property is proven to be lucrative but it isn’t without its headaches, not least the prohibitive costs and lack of liquidity of dealing in physical assets. Standardised securitisation of real estate assets would remove both of those constraints and open up the market to a much broader range of investors.
The negative newsflow around the UK real estate market is mounting.
The last few weeks it was all about falling consumer confidence and supply constraints in residential property, highlighted in media coverage of the Budget. Now, it’s the slowdown in commercial office space grabbing the headlines.
The number of new office developments getting under way in London has dropped by 9 per cent in the past six months, according to a new report from consultants Deloitte.
The firm’s London Office Crane Study also indicates the amount of new office space under construction is at its lowest since 2014.
“The changeable business environment continues to keep CFOs on a cautious footing,” said Deloitte. “It is this caution that is being reflected in the shifting outlook for future office development.
“The top of the list is Brexit, and during the negotiation period it will continue to play its part in creating uncertainty for businesses, now and potentially after the exit.”
“Retail investors are often accused of chasing returns, buying when prices are high and selling after they have fallen.”
So far, so bad. But it’s easy to be gloomy about the immediate outlook for real estate, and ignore the medium to long-term view.
Behavioural economists call it anchoring, the natural human tendency to base judgment, often irrationally, on the most recent information available. Step back from the headlines, examine the underlying trends, and the outlook for UK real estate appears much brighter.
Deloitte’s study, published bi-annually, shows that despite the second successive fall in the current level of space under construction, 2017 remains on course to produce the highest level of completed space in 13 years.
And, although forecast future demand for office space has softened from the break-neck speed of recent years, it remains above-average for each year to 2021.
Even more encouraging is the vote of confidence in real estate from long-term institutional investors, such as pension funds.
Ever since the Great Financial Crisis, when bonds and equities unexpectedly fell simultaneously, institutional investors have been searching for ways to diversify into uncorrelated sources of returns, such as alternative assets, in the belief that they will help to smooth returns over time.
Asked “Which asset classes will be most suited to meet your plan’s goals over the next three years?” European pension funds surveyed by Create-Research, an independent research boutique specialising in asset management, said that their number one choice was global equities with real estate bonds second and alternative credit third.
“Real estate will go on attracting rising allocations after scoring new highs lately,“ said Create. “Like infrastructure, it is now credited with defensive features such as steady capital growth, regular income and inflation protection.”
Retail investors are often accused of chasing returns, buying when prices are high and selling after they have fallen. Institutional investors, on the other hand, are supposed to do the opposite, buying when prices are low and selling before they peak.
That’s the theory, at least. The Great Financial Crisis, when even the biggest and most sophisticated institutions were caught napping, showed that reality can be somewhat different.
Even so, with mainstream equities and bonds once again at, or near, all-time highs, and investors increasingly worried about the risks of a dramatic correction in both, increasing allocations to alternatives, such as real estate bonds, seems like a prudent move for retail investors as well as large institutions.
As originally published on FT Adviser on 20 December 2017.
With equities and bonds both at record highs, it’s a real challenge for retail investors to find value in today’s markets. Institutional investors face the same dilemma and are increasingly favouring alternatives, including real estate. But retail investors haven’t historically had the same opportunities to gain exposure to the asset class.
Until recently, UK investors were filling their boots with buy-to-let properties, but that market is now looking less lucrative. Savills is forecasting that it will dive by 27% by 2022. The estate agent says it is already seeing the first signs of landlords selling up and exiting the market, a trend that is likely to continue as tighter mortgage regulations, increased stamp duty charges and the phasing out of mortgage interest relief combine to deter direct investments in property.
Real estate investment trusts (REITs) are one alternative, albeit indirect, route into the market. PIMCO, the world’s largest bond manager, says that in the US total returns for the Dow Jones Select REIT Total Return Index are lagging the S&P 500 by nearly 1,100 basis points (bps) in the last 12 months. “The upshot? REIT valuations are looking attractive relative to other liquid financial assets,” says PIMCO.
The manager’s reasoning is that over the past 20 years, for every 10 bps of “cheapness” compared to the real yield available on other financial assets, using Treasury Inflation-Protected Securities as a benchmark, subsequent REIT returns over the next 12 months have been 180 bps higher, all else being equal.
“The current spread of roughly 80 bps is solidly above the 15-bp long-term average, and with the exception of the 2008-2009 financial crisis, is near the widest level since June 2004 – at which point REITs returned 35% over the next 12 months, outperforming the S&P 500 by more than 2,500 bps,” says PIMCO.
Some UK listed REITs, after falling heavily in the wake of the Brexit vote, are still trading at a discount to the value of the underlying assets and also look attractively valued if you believe, as we do, that the UK market isn’t about to collapse.
The downside, however, of investing in property via a REIT is fourfold. First, you’ll need to select a fund run by a skilled manager to delegate the responsibility of deciding which properties to include in the portfolio. Second, you’ll need to pay them a hefty fee. Third, the diversification benefits are likely to be limited because REITs are correlated with the stock market. And fourthly, frankly, it’s dull and boring.
While some less confident investors will welcome an expert taking all the decisions for them, others who want more control over their investments will miss out on the emotional excitement of being closely involved in the deal.
Fortunately, there is another alternative.
Thanks to the advent of crowdfunding, investing in real estate is now far more accessible than ever before. Investors no longer need to put all their eggs into just one or two buy-to-let baskets at one extreme or surrender control to an expensive fund manager at the other.
They can now effectively get the best of both worlds. They can do their own detailed due diligence, have full discretion over which properties go into their portfolio (without managing the day-to-day like conventional buy-to-let landlords do), and they can gain access to syndicated deals with superior risk-adjusted returns which would normally be reserved for institutional investors in the know. All from the comfort of their armchairs and with the click of a mouse.
The downside of real estate crowdfunding, unlike REITs, remains the lack of liquidity. There is no recognised trading exchange for real estate securities. But watch this space. Property Crowd’s parent company, Global Alternatives, is working on establishing one. We hope to be able to share more details about our new exchange shortly.
As originally published on Altfi on 03 January 2018.
The UK real-estate market, commercial and residential, is already slowing, particularly in London, and it may decelerate further over the next year or so as the ripples spread outwards from the capital until the Brexit cloud lifts. But it’s hard to envisage a crash when interest rates and unemployment are so low and credit remains accessible.
Irrespective of the cyclical slowdown, the structural underpinnings of the UK property market – scare land supply and dense population growth (latest figures show the sharpest increase for 70 years) – point to continued steady growth in volume and prices in the medium to long term.
Crowdfunding is set to play an increasingly important role in the real-estate market. Despite a plentiful supply of credit, smaller developers still struggle to access capital from banks sticking rigidly to stricter lending criteria after the financial crisis. And, notwithstanding the recent tiny increase in bank base rates, lenders, having discovered the yield and diversification benefits of property crowdfunding, will continue to flock to the new platforms that have sprung up.
It was interesting to see that in a recent survey by the research boutique CREATE, institutional investors across Europe put real estate debt right near the top of the list of asset classes that they find most attractive over the next three years. Like infrastructure, real estate offers steady capital growth, regular income, and inflation protection, and institutions can’t get enough of it. No wonder that UK pension schemes now have their highest average allocations to real estate since 2008 (5.3%) while average equity allocations have sunk below 30% for the first time on record as schemes continue to de-risk, according to data from the Pension Protection Fund.
Where institutions tread, retail investors are sure to follow. I doubt, however, that they will be able to “shop” at quite so many different outlets in the future. There has been an explosion in property crowdfunding sites in the last few years, all selling similar wares. But their business models are not all equally robust.
At Property Crowd, we have resisted the temptation to try and do everything ourselves under one roof. Instead, we have differentiated our business by partnering with a range of experts to bring our deals to market. These include established institutional lenders to originate, manage, and part-fund the deals and top law firms to perform the legal due diligence. We have also put in place independent custody arrangements for holding investors’ cash and securities. In addition, we only offer short-term investment opportunities with clear exit strategies that are secured against assets with low loan-to-value ratios.
These safeguards add up to a robust investor protection framework that we believe will help us stand out from the crowd as the market inevitably consolidates.