Investment in real estate funds requires far more attention to detail than investing in property directly, a specialist real estate and investment funds’ law firm warns. On the surface, this may be a passive investment, but in reality a lot more is required from the fund manager, the firm says.

As a real estate investor, you may think you will have an easier time pooling investments in funds instead of investing in property yourself, but  law firm Bech-Bruun is cautioning investors with this idea to think again.

Comprehensive risk assessment requires a great deal of transparency and the funds must have competent leadership with a healthy governance structure, says Tina Øster Larsen, partner at Bech-Bruun, in a letter to the editor of FWAM sister site EjendomsWatch this summer.

"Investing in real estate funds has a fundamental character of a passive investment, as the investment responsibility is left to the fund manager. Investors are given very little power and do not actively participate in, or have any influence on, the operation of the fund or the selection of its investments," Øster Larsen writes, and says it is crucial for the selection of fund managers to be part of a sufficiently thorough due diligence process.

English Edit: Gretchen Deverell Pedersen