WestOne Secured Lending, a London-based provider of commercial and residential bridge finance, believes property bridge loans offer better returns and long-term value with lower volatility than other alternative investments, such as wine, gold and fine art.
In the one year ending July 1, for example, private investors in short-term secured loans have seen a total annual return of 10.5 percent, compared to collectable art at 5.3 percent and negative returns for wine and gold investments, it argued in a report published this week. Physical gold investments are now 1.6 percent less in value, while investors in fine wine experienced an even steeper decline of 16.5 percent.
In a chart outlined by WestOne, a bridge loan investment worth £500,000 made on July 1 last year would be worth £552,500 this July, while gold and fine wine would have fallen to £492,000 and £417,500, respectively. Fine art, though, would have risen to £526,500, but would still be worth less than a real estate bridge loan.
Volatility has also fared better for property bridge loans, which have a three month standard deviation of 0.03 percent volatility, while fine wine was at 1.6 percent, fine art was at 1.7 percent, and gold was the highest at 10 percent for the three-months leading up to July.
Duncan Kreeger, a director at WestOne, said in a statement that, “Sophisticated investors are looking to alternative assets as a new way to navigate risk and return, spreading their capital between a greater variety of asset classes.” But real estate bridge loans offer a better way of linking the investor to the tangible asset class than some of the other investments mentioned in the study, Kreeger argues. “Short-term property loans from individuals to developers have a similar level of liquidity as many physical assets, but allow more imaginative links with profitable projects,” he added.