Calling it quits!

Whizzard and HNWI

How do you guys view or fair when it comes to allocating assets into alternative investment vehicles like Hedge funds? I have been into some global funds and fund of funds for a diversified exposure for some time now, and I feel I should give it a try at allocating some capital at highly specialised hedge funds that seem to be capturing some decent alpha, like quant macro or volatility arbs.

One fund I have been tracking and is of a particular interest is Quantedge fund, a quant global macro. annual average returns on NAV have been northwards of 30%pa, although it's highly leveraged. What concerns me is that it lost 10% of equity in june and another 20% in july, a 30% loss in just two months due to fed interest rate volatility caused by you know what. Im guessing such volatility caused by information overflow and toxicity in concentrated fed announcements simply were not callibrated into their models, yet it does have a decent track record. NAV as of june was around 600M btw.

What do you guys think? Should i enter quantedge to take advantage of the dip? I understand that fund dips are not exactly as opportune as equity dips for fundamental reasons, but still... Let me know of your thoughts and past experiences.

[whizzard]

Originally Posted by Apollo John

Whizzard and HNWI

How do you guys view or fair when it comes to allocating assets into alternative investment vehicles like Hedge funds? I have been into some global funds and fund of funds for a diversified exposure for some time now, and I feel I should give it a try at allocating some capital at highly specialised hedge funds that seem to be capturing some decent alpha, like quant macro or volatility arbs.

One fund I have been tracking and is of a particular interest is Quantedge fund, a quant global macro. annual average returns on NAV have been northwards of 30%pa, although it's highly leveraged. What concerns me is that it lost 10% of equity in june and another 20% in july, a 30% loss in just two months due to fed interest rate volatility caused by you know what. Im guessing such volatility caused by information overflow and toxicity in concentrated fed announcements simply were not callibrated into their models, yet it does have a decent track record. NAV as of june was around 600M btw.

What do you guys think? Should i enter quantedge to take advantage of the dip? I understand that fund dips are not exactly as opportune as equity dips for fundamental reasons, but still... Let me know of your thoughts and past experiences.

According to UBS Wealth Management, one should allocate 13% of your strategic portfolio allocation into hedge funds based on current market conditions.

I have personally never invested in hedge funds before. At this stage, I am still a little uncomfortable putting money into hedge funds. If I were to be "forced" into investing in hedge funds, I would only be comfortable to put money that I am prepared to take a total loss into hedge funds. I know that sounds conservative. 13% would therefore appear to be too high in relation to my personal risk appetite for hedge funds.

Originally Posted by whizzard

Hmm, don't really get you when you say nearer the central region. Property analysts and agents would describe the location as Core Central Region ("CCR"), being located in the Oxley-Orchard area.

Anyway, yes, I try to avoid large developments which do not offer a differentiated product generally. This particular development was designed by an international multi-award winning architect on a 250,000 sq ft area located on a high ground with a total of only 176 units. Being a low density development, it offers a green sanctuary within the heart of the city. The underground carpark has ample lots even for residents with multi car ownership and their guests. From the carpark, each unit has their own bio-metric controlled private lift lobby (which services only 5 units, 1 unit per floor) which only opens up at your private foyer. The probability of bumping into your neighbour is therefore very low - who you bring to your unit and what time you come and go is very private. I think I can be a property agent!

Was told that a number of prominent Singapore personalities which I shall not name, own a number of units there but I have never seen them there before.

This development that you are describing sounds like a condo in Balmoral, which I shall not name. Apparently a certainly billionaire lives there, owns half the units there and floods the carpark with his fancy cars. Is that the one you are talking about? The rental yield is quite terrible there.

[whizzard]

Originally Posted by SAHM

This development that you are describing sounds like a condo in Balmoral, which I shall not name. Apparently a certainly billionaire lives there, owns half the units there and floods the carpark with his fancy cars. Is that the one you are talking about? The rental yield is quite terrible there.

Are you talking about Peter Lim? No, I can't even smell him let alone stay anywhere near where he stays. If he were to throw his chum change cash at me I would be suffocated.

Yes, the rental yield for my place is also terrible but that's because the capital cost is too high and these days, there are not that many expats with fat packages. I believe the potential for capital appreciation in my development is good and I like the low density and exclusivity. I would just have to live with the low yields in the meantime.

Originally Posted by whizzard

Are you talking about Peter Lim? No, I can't even smell him let alone stay anywhere near where he stays. If he were to throw his chum change cash at me I would be suffocated.

Yes, the rental yield for my place is also terrible but that's because the capital cost is too high and these days, there are not that many expats with fat packages. I believe the potential for capital appreciation in my development is good and I like the low density and exclusivity. I would just have to live with the low yields in the meantime.

Dear whizzard,

Thank you very much for sharing, from you as well as other contributors. I came here from HWZ (some link on a thread), and realised that most of the posts here are of value, rather than the most of the posts on EDMW. Still go to EDMW for fun, but I really learnt a lot here, from reading the entire of this thread (as well as the Networth thread). So, thanks!

I have a few questions though, if it is possible for those who have rental property to answer. Do you all hold your properties under your own name, or under a pte ltd company? I'm just starting out in adult life, mid 20s. I know I wouldn't get as good a deal on property prices now, but I do wanna plan for retirement in future / passive income.

My plan is to gather up about 50K of my own money, together with 2-3 friends, dump in in a commercial property (warehouse or something similar), held by a pte ltd company (shares equal to our contribution), and sublet it out. I want to have enough passive income before I even think about buying a car.

Actually, I'm already thinking about buying a car (I work in sales, so it would help, but I can honestly say that it's not a requirement, not at the current moment). Still, I want to have enough recurring income to pay for my car expenses, so I'm not "working" for my car, so to speak. Any ideas / thoughts on this?

Thanks,
JSO

[whizzard]

Originally Posted by JustStartingOut

Dear whizzard,

Thank you very much for sharing, from you as well as other contributors. I came here from HWZ (some link on a thread), and realised that most of the posts here are of value, rather than the most of the posts on EDMW. Still go to EDMW for fun, but I really learnt a lot here, from reading the entire of this thread (as well as the Networth thread). So, thanks!

I have a few questions though, if it is possible for those who have rental property to answer. Do you all hold your properties under your own name, or under a pte ltd company? I'm just starting out in adult life, mid 20s. I know I wouldn't get as good a deal on property prices now, but I do wanna plan for retirement in future / passive income.

My plan is to gather up about 50K of my own money, together with 2-3 friends, dump in in a commercial property (warehouse or something similar), held by a pte ltd company (shares equal to our contribution), and sublet it out. I want to have enough passive income before I even think about buying a car.

Actually, I'm already thinking about buying a car (I work in sales, so it would help, but I can honestly say that it's not a requirement, not at the current moment). Still, I want to have enough recurring income to pay for my car expenses, so I'm not "working" for my car, so to speak. Any ideas / thoughts on this?

Thanks,
JSO

Hi JSO,

All my property investments have always been under my personal name or on a joint name basis with my wife as the other owner. Whilst there could be some advantages in terms of incorporating a company to hold your property investments e.g. claiming certain expenses agst your rental income for tax deduction, I did not do so as there are also some obligations to comply with if I were to have a pte ltd company owning the properties.

The other factor to consider, in your case where you are sharing the property with some friends, is that if you were to hold the property under a pte ltd company, you would only own shares in that property owning company. What if you want to sell off later? You would be selling shares of the company ..... don't know about the marketability of that. Of course, you could always structure a shareholders' agreement at the onset which states out what would happen if one or more partners decide to sell, what is the expected "quorom" that will be required to make certain decisions on the property (instead of a consensual vote all the time), etc. In short, it's not a good idea to share the investment because it could potentially lead to quite a fair bit of complications later on.

Why are so many people fixated with the idea of owning properties to finance their lifestyle or retirement? When the property market undergoes a cyclical downturn eventually, I dread to think of the consequences.

Property is just one of many asset classes out there. Don't put all your eggs in one basket. Yes, properties are expensive in Singapore and therefore it accounts for a substantial portion of most people's portfolio and when you are starting out, your investments would always be in one basket due to relatively low savings at that point in time. That being the case, you should be even more careful to plan for a scenario where it does not pan out as you expect it to. Furthermore, the net yields on investing in physical properties in Singapore is actually very low. You may be better off investing in well managed REITs if you are looking at it from a cashflow perspective.

Originally Posted by JustStartingOut

Dear whizzard,

Thank you very much for sharing, from you as well as other contributors. I came here from HWZ (some link on a thread), and realised that most of the posts here are of value, rather than the most of the posts on EDMW. Still go to EDMW for fun, but I really learnt a lot here, from reading the entire of this thread (as well as the Networth thread). So, thanks!

I have a few questions though, if it is possible for those who have rental property to answer. Do you all hold your properties under your own name, or under a pte ltd company? I'm just starting out in adult life, mid 20s. I know I wouldn't get as good a deal on property prices now, but I do wanna plan for retirement in future / passive income.

My plan is to gather up about 50K of my own money, together with 2-3 friends, dump in in a commercial property (warehouse or something similar), held by a pte ltd company (shares equal to our contribution), and sublet it out. I want to have enough passive income before I even think about buying a car.

Actually, I'm already thinking about buying a car (I work in sales, so it would help, but I can honestly say that it's not a requirement, not at the current moment). Still, I want to have enough recurring income to pay for my car expenses, so I'm not "working" for my car, so to speak. Any ideas / thoughts on this?

Thanks,
JSO

What is EDMW and HWZ ?

Hi,

I have some structure as you mentioned but its only managed by myself. I did think of creating a such a vehicle for the purpose of getting people to invest with me but decided it too troublesome. Anyway here are some things you need to note from my observations

Buying Commercial property
1. Recently prices have shot thru the roof, rental yield is quite low compared to previously so you have consider if this investment is worth your while
2. Pte Ltd company would probably be best to hold the investment. (share division etc)
3. Commercial properties charge GST on top of purchase price, if you have a GST registered company you can claim back on this. However it means you also need to charge GST to your tenant (Won't be an issue if your tenant is GST registered also)
4. As Whizzard said there will bound to be lots of conflicts, hence there must be an anchor investor to call the shots. For example if someone wants to cash out the contract must clearly state the terms of cashing out (i.e can only sell to anchor investor or existing investors, time frame of completion and notification, more importantly valuation of property i.e liquidated value or market value etc)
5. Someone will need to take active management in terms of finding tenants submitting GST, account. MCST, prop tax etc. This can be the anchor investor and perhaps work out a fee as part of the "management package"
6. When investing in commercial you have to know the market, i.e ceiling height, floor load, industrial permission B1, B2 etc. Target tenants, Ramp up unit etc. Don't buy a unit no one wants to rent just because the Feng Shui aint good
7. The advantages of commercial is generally the unit is bare and the tenant has to sort out everything themselves (Reno etc)
8. Company property loans are a hassale, best if you and your investors can do upfront cash. If not the directors of the company will have to come in as personal gurantors.

That's the high level in a nutshell, its viable but pending on your foresight for undervalued property. I can tell you compared to what I bought my industrial units at the market is flying high now.

Good luck

Originally Posted by JustStartingOut

Dear whizzard,

Thank you very much for sharing, from you as well as other contributors. I came here from HWZ (some link on a thread), and realised that most of the posts here are of value, rather than the most of the posts on EDMW. Still go to EDMW for fun, but I really learnt a lot here, from reading the entire of this thread (as well as the Networth thread). So, thanks!

I have a few questions though, if it is possible for those who have rental property to answer. Do you all hold your properties under your own name, or under a pte ltd company? I'm just starting out in adult life, mid 20s. I know I wouldn't get as good a deal on property prices now, but I do wanna plan for retirement in future / passive income.

My plan is to gather up about 50K of my own money, together with 2-3 friends, dump in in a commercial property (warehouse or something similar), held by a pte ltd company (shares equal to our contribution), and sublet it out. I want to have enough passive income before I even think about buying a car.

Actually, I'm already thinking about buying a car (I work in sales, so it would help, but I can honestly say that it's not a requirement, not at the current moment). Still, I want to have enough recurring income to pay for my car expenses, so I'm not "working" for my car, so to speak. Any ideas / thoughts on this?

Thanks,
JSO

Originally Posted by whizzard

Hi JSO,

All my property investments have always been under my personal name or on a joint name basis with my wife as the other owner. Whilst there could be some advantages in terms of incorporating a company to hold your property investments e.g. claiming certain expenses agst your rental income for tax deduction, I did not do so as there are also some obligations to comply with if I were to have a pte ltd company owning the properties.

The other factor to consider, in your case where you are sharing the property with some friends, is that if you were to hold the property under a pte ltd company, you would only own shares in that property owning company. What if you want to sell off later? You would be selling shares of the company ..... don't know about the marketability of that. Of course, you could always structure a shareholders' agreement at the onset which states out what would happen if one or more partners decide to sell, what is the expected "quorom" that will be required to make certain decisions on the property (instead of a consensual vote all the time), etc. In short, it's not a good idea to share the investment because it could potentially lead to quite a fair bit of complications later on.

Why are so many people fixated with the idea of owning properties to finance their lifestyle or retirement? When the property market undergoes a cyclical downturn eventually, I dread to think of the consequences.

Property is just one of many asset classes out there. Don't put all your eggs in one basket. Yes, properties are expensive in Singapore and therefore it accounts for a substantial portion of most people's portfolio and when you are starting out, your investments would always be in one basket due to relatively low savings at that point in time. That being the case, you should be even more careful to plan for a scenario where it does not pan out as you expect it to. Furthermore, the net yields on investing in physical properties in Singapore is actually very low. You may be better off investing in well managed REITs if you are looking at it from a cashflow perspective.

Hi whizzard,

I did consider that we'd all be owning shares in the company, and not directly in the property itself. I did plan for some details for this, thanks for sharing though. I ran through several scenarios with regards to the divestment of the stakeholder / shareholders in the company, divestment of the company's property, as well as purchase of new property and management of the property. Though, admittedly, I haven't planned out all the complications that might arise.

For me, I guess I'm heavily influenced by Robert Kiyosaki's Rich Dad Poor Dad, though I'd not be buying property on as high margins as him. Not planning to get into the market currently, prices are quite high. I've considered REITS, but still don't understand fully how the gearing / interest / SIBOR / LIBOR affects every single price movement, so I'd not be investing in it at the current moment. I'm looking at both a comfortable cashflow, as well as capital appreciation. Also, a little background on me, I'm working in an IT firm, so the tenants could become a new source of leads for me too.

Originally Posted by Unregistered

What is EDMW and HWZ ?

Eat-Drink-Man-Woman, a subforum of HardWareZone forum. EDMW has quite childish posts / threads, I'm not a member, but just silently read some of the threads for entertainment.

Originally Posted by dives

Hi,

I have some structure as you mentioned but its only managed by myself. I did think of creating a such a vehicle for the purpose of getting people to invest with me but decided it too troublesome. Anyway here are some things you need to note from my observations

Buying Commercial property
1. Recently prices have shot thru the roof, rental yield is quite low compared to previously so you have consider if this investment is worth your while
2. Pte Ltd company would probably be best to hold the investment. (share division etc)
3. Commercial properties charge GST on top of purchase price, if you have a GST registered company you can claim back on this. However it means you also need to charge GST to your tenant (Won't be an issue if your tenant is GST registered also)
4. As Whizzard said there will bound to be lots of conflicts, hence there must be an anchor investor to call the shots. For example if someone wants to cash out the contract must clearly state the terms of cashing out (i.e can only sell to anchor investor or existing investors, time frame of completion and notification, more importantly valuation of property i.e liquidated value or market value etc)
5. Someone will need to take active management in terms of finding tenants submitting GST, account. MCST, prop tax etc. This can be the anchor investor and perhaps work out a fee as part of the "management package"
6. When investing in commercial you have to know the market, i.e ceiling height, floor load, industrial permission B1, B2 etc. Target tenants, Ramp up unit etc. Don't buy a unit no one wants to rent just because the Feng Shui aint good
7. The advantages of commercial is generally the unit is bare and the tenant has to sort out everything themselves (Reno etc)
8. Company property loans are a hassale, best if you and your investors can do upfront cash. If not the directors of the company will have to come in as personal gurantors.

That's the high level in a nutshell, its viable but pending on your foresight for undervalued property. I can tell you compared to what I bought my industrial units at the market is flying high now.

Good luck

Hi dives!

Thanks for the tips / observations. Currently, my cash isn't enough to buy a commercial property outright, plus, valuations are on the high side. I'm just setting out plans for market corrections, if any.
2. Yep, it'd be a Pte Ltd company.
3. I see, thanks for this. The current company I'm renting from is charging GST for rent, so thanks for notifying me.
4. Planning to set myself as the anchor investor. I did set out the terms already, but the valuation of the property will be a hard thing to do. Mostly, sales will only be done to other investors who are already in, subject to veto from management (if the outgoing investor only want to sell to one investor and not the rest)
5. Yep.
6. Thanks for this! Will do more research on this..
7. I only plan to pain the walls, and have false walls to partition the office, with power / internet and phone lines set up. No renovation by the tenants, only removable furniture to be used.
8. Didn't check out on this yet. Can you clarify more on this if possible(meaning, how are they more of a hassle than say, private property?) Thanks!

Thank you very much for you insights, not planning to enter the market at the moment. Just waiting for correction, if there is, good, else, no problem, just wait for a while lor.

Hi,
I will reply you on some of your points.

4. Planning to set myself as the anchor investor. I did set out the terms already, but the valuation of the property will be a hard thing to do. Mostly, sales will only be done to other investors who are already in, subject to veto from management (if the outgoing investor only want to sell to one investor and not the rest)

- Ultimately you have to make it clear on the entry and exit criteria for any investors to be confident in you. I.e when to dispose of the asset etc, I suggest for valuation best would be to state in the contract that the forced valuation sale from 2 – 3 valuers be taken into consideration and average that? (Force liquidation and market perceived value has a big difference). Also Dividend payouts from rental etc (Taxable)

6. Thanks for this! Will do more research on this..
- I bought a book called commercial real estate investment by Roy Chung, the cover is kind of lame but the author makes good points, this is a good all in one starter.

7. I only plan to pain the walls, and have false walls to partition the office, with power / internet and phone lines set up. No renovation by the tenants, only removable furniture to be used.
- I believe your intention is to have the unit support multiple smaller offices and lease out to small individuals with businesses? If this is the case I have to caution that for decent profits usually B1 (light industrial) is used for such purposes and using the unit as such is a grey area (I seen URA chase out several such businesses from my industrial stack).

8. Didn't check out on this yet. Can you clarify more on this if possible(meaning, how are they more of a hassle than say, private property?) Thanks!

- Commercial loans have more fine print I found, annual maintenance fee on the loan. Best ask the banker for more details.

- Not sure how much down payment the company is required to provide, but typically the banks need a lot of guarantors come in for the loan since the company itself has no income. I assume if you are the director you will need to come in and guarantee the loan, if your income is not sufficient then you might need to get your shareholders in. If you got many of them it will be a pain.

- Also your approach will work if you literally get investors and the company setup now and have the cash ready, IMO if the market does turn by the time you set all this up might have missed the boat liao.

Good luck