I have mixed feelings about the whole thing.
I get what you are saying, broadly. I even agree that it would be good to take some of this cash and aim it at things like affordable-housing projects, SNS improvements, and other goals that the government wishes to promote.
However the government is attempting to steer the incoming flood of cash via policy, and itās going to be a blunt and inexact instrument no matter how you do it. And then you have to sell the investors on giving you their money on these āsub-optimalā projects with low returns.
Itās just hard to even say what a āreal estate investmentā is. A number of 's investments are in the form of the creation of a SPV where essentially the fund is buying property from an existing company with a clawback that lets the company guaranteedly purchase the property back from the fund at either the original price or a market price or whatever, then renting the property to the company. And sometimes that money from the sale is used by the company to do real estate construction, but not always, it depends. Is that a real estate investment? Or a tax-efficient way to pump capital into a company? Or simply an exotic loan-by-another-name? All of the above?
So why canāt someone effectively do the same thing or something like it, with a single house or apartment building? Iām sure Lince would be all over that, some sort of standard-form lite āfundā. Ok, we can stop that, letās make some rules to stop that. Well, more games. etc.
I think the fundamental issue is that
- most GV investors are not professionals.
- few are even sophisticated enough to understand the basic mechanics or understand what the heck it is they even bought, so they confuse it with something like a mutual fund back home, and make any number of assumptions that they really shouldnāt.
- worse, theyāre in a foreign country, and probably just blithely thinking that āit all works there like it does hereā when it really probably doesnāt -
- and are expecting first-world returns in a country with what is essentially an emerging-market economy that canāt possibly provide them, and canāt get their heads around that -
- and are taking advice from people who in the main have no reason to put the investorās interests first.
- meanwhile the government is trying to manage a situation (a sudden flood of investors) it truly didnāt expect which is operating through a new series of products it has no experience in managing and without a clear view where itās even going because in the grander scheme of the timescales that governments operate on, this has all happened in the blink of an eye.
I suspect the better of these funds were originally started with an assumption that they would get a certain amount of mostly-invested sophisticated investors. Who else would invest in a VC fund? And why wouldnāt someone from the US with a half mil to spare be a sophisticated investor? What does someone in PT know about that, given anyone in PT with 500k counts as ārichā and is probably using wealth managers? But thenā¦ it happened how it did, and everything went off the rails.
IMO, Mercan is a far better model for most people. Have a large company with a significant back-story come in and present pre-canned safe options - Iād count ābuilding a hotel that can be easily franchised under a major multinational brand in a tourist-driven economyā as being a pretty damn safe bet - and funnel most people there. Sure, returns are modest at best, but a large company like that can invest resources to explain the what and why to its investors. I think Holborn/Excellium may not be too bad either. Thereās a french firm doing construction in Portugal that could easily learn to play in this space. Just give those companies rules on what the gov wants built and stand back and regulate them, rather than to use the VC structures at all.
But. Itās complicated.