Portfolio management issues with overseas property

I'm a hard line economist with regard to portfolios. There is a single commandment: diversification.

That's why I worry when I see 'investors' whose total wealth is in residential property. They seem to think they are not running a risk.

With all their assets in a single asset class, they have in fact taken on a massive risk!

Now I'm not advocating that we all have model portfolios. My own portfolio, for instance, has a much higher skew to emerging markets and new technologies than most, including a big chunk in alternative energy stocks. But then I also have quite a bit of cash. And residential property. (I probably should have some commercial property - but not at today's yields.) And a boat.

(Does anybody want the boat by the way? She's a lovely 28' Broads cruising yacht*, all mahogany and gleaming brass, and she's for sale.)

But for all except the very wealthy, or those specialising in cheap-as-chips markets (which in itself implies a lack of diversification, committing too heavy a percentage to high risk areas), diversification in overseas property is unachievable. Simply, each property costs too much. And there is a big overhead in terms of management time and cost.

So I was impressed when I saw what 4:Property Projects has been doing in Eastern Europe - setting up projects with a minimum £10k entry level. Think about it; for a £30k in-cost, you can participate in three different markets - spreading your assets between property types, countries, and locations.

Because 4:Property joint ventures with developers, and is selling a share in the project, it's a hands-off transaction. And investors should get better returns than buying their own property because they'll get a share of the development margin. Even better, there should be a decent exit as the project will last from one to three years, creating a natural exit point.

I haven't seen the prospectuses yet and this *is* defined as a product for sophisticated investors only. But it's a very interesting way forward. I wonder if they might list on the stock market eventually? Then you wouldn't even need £10k to invest - you could just buy shares through your online broker. I wonder if you could put them in your SIPP?