Yield of Dreams

An Alternative to Non-Traded REITs with Daily NAV

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Mark Quam, pictured, came from a non-traded REIT provider, but his new mutual fund looks quite different.

Mark Quam came from the non-traded REIT world, so he knows how hard it is to make money in that space. But he also understands the downsides to the investment—high fees, limited liquidity, and little transparency. That’s why Quam decided to launch an alternative to non-traded REITs for retail investors—the Versus Capital Multi-Manager Real Estate Income Fund (VCMRX).

There are plenty of publicly traded REITs, REIT mutual funds, REIT ETFs, and mutual funds that invest in the real estate sector of the stock market. But this is the first mutual fund, to my knowledge, to invest in private equity real estate.

Quam, CEO of Versus Capital, designed the fund to combat some of the very issues creeping up in the non-traded REIT world. It’s structured as a continually offered closed-end fund, with quarterly liquidity, no lock ups, daily NAV and greater transparency. It’s also a fee-based product, with no up-front fees. It runs 95 basis points per year. Although private equity real estate funds typically have minimums of $5 million, Quam’s fund has a minimum of $10,000.

The fund is comprised of 10 private equity real estate managers, including UBS Global Asset Management, J.P. Morgan Asset Management, and AEW Capital Management. Managers were selected by Callan Associates, the institutional consultant and sub-advisor to VCMRX, via Callan’s due diligence process. “We wanted to build a platform to give [individual investors] access to [institutional managers],” Quam said.

At the moment, the fund has about $5 million in assets, but Quam said he expects that to grow to $750 million in the next six months. The fund just recently got approved for Schwab’s platform. It’s also on the Pershing and First Clearing platforms. Time will tell whether other fund providers come out with similar products.

Non-traded REITs have been raising red flags across the industry. And lately several REITs have been getting bad press because of their sudden decline in value. The Financial Industry Regulatory Authority issued a notice last year requiring REIT providers to keep valuations up to date, and that requirement is coming to fruition. Quam doesn’t believe the worst is over; only the best asset managers in the space will survive, he says. Stay tuned for more on this…

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What's Yield of Dreams?

Casting a gimlet-eye on asset management issues.

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