SICAVs vs. Real Estate Investment Funds: What are the differences?

What Is a SICAV?

SICAV stands for Société d'Investissement à Capital Variable, which translates as an investment company with variable capital.

It is a corporate structure used by collective investment vehicles to pool capital from multiple investors and invest it according to a predefined investment policy.

The defining characteristic of a SICAV is its variable capital.

Subscriptions can lead to the issuance of new shares, while redemptions can result in shares being cancelled, subject to the terms and restrictions set out in the fund documentation.

Investors in a SICAV therefore hold shares in an investment company rather than directly owning each underlying asset.

What Can a SICAV Invest In?

The term SICAV does not determine the type of assets held by the fund.

Depending on its investment policy, a SICAV may invest in:

• listed equities;
• government bonds;
• corporate bonds;
• money market instruments;
• other investment funds;
• private debt;
• private equity;
• infrastructure;
• real estate;
• other eligible assets.

Two SICAVs can therefore have completely different risk, return and liquidity profiles.

An equity SICAV may be primarily exposed to movements in global stock markets, whereas a real estate SICAV may be more sensitive to property valuations, rental income, financing costs and the liquidity of physical assets.

Good to know

A SICAV is not an asset class.

The legal structure alone does not tell investors what they are exposed to.

Understanding a SICAV requires looking at its investment policy, underlying assets, liquidity arrangements, costs and risk profile.

For a more detailed explanation, see the guide to SICAVs and how they work.

What Is a Real Estate Investment Fund?

A real estate investment fund pools money from investors and invests it directly or indirectly in property-related assets.

Depending on the strategy, the portfolio may include:

• residential property;
• office buildings;
• logistics assets;
• retail property;
• hotels;
• mixed-use buildings;
• healthcare property;
• real estate companies;
• real estate debt;
• other property-related investments.

Instead of purchasing and managing a single property directly, investors gain exposure to a portfolio managed according to the fund's investment policy.

This structure can provide exposure to multiple properties, sectors and geographical markets.

Diversification may reduce certain concentration risks, but it does not remove the possibility of capital loss.

Makers fund, for example, combines Core/Core+ and Value-Added approaches within a broader European real estate allocation. More information is available on the Makers fund investment strategy.

SICAVs and Real Estate Funds Are Not Opposites

This is the central point of the comparison.

The question “SICAV or real estate investment fund?” compares two different characteristics of an investment vehicle.

A SICAV can therefore also be a real estate investment fund.

For example:

SICAV + equity strategy = a SICAV mainly invested in equities

SICAV + bond strategy = a SICAV mainly invested in fixed-income securities

SICAV + real estate strategy = a SICAV providing exposure to real estate investments

Similarly, a real estate investment fund does not necessarily have to be structured as a SICAV.

SICAV vs. Real Estate Investment Fund: Key Differences

For the comparison below, “SICAV” refers to a more traditional SICAV mainly invested in financial securities.

These are general characteristics.

The actual features of a specific fund can differ significantly and should always be checked in its regulatory documentation.

What Assets Can a SICAV Hold?

A SICAV can be used for a wide range of strategies.

Equity SICAVs

An equity SICAV may invest across:

• countries;
• industries;
• company sizes;
• currencies;
• developed markets;
• emerging markets.

Performance can therefore depend on factors such as corporate earnings, market valuations, economic growth and investor sentiment.

Bond SICAVs

Bond-focused SICAVs may be more exposed to:

• interest rates;
• bond duration;
• issuer creditworthiness;
• inflation;
• credit spreads.

A bond fund may behave very differently from an equity fund even though both use the same SICAV legal structure.

Diversified SICAVs

Some SICAVs combine several asset classes in a single portfolio.

These may include:

• equities;
• bonds;
• cash;
• alternative investments;
• real estate exposure.

Real Estate SICAVs

A SICAV can also follow a real estate investment strategy.

Exposure may be obtained through:

• directly held property;
• property-owning companies;
• underlying investment vehicles;
• real estate debt;
• other eligible instruments.

Makers fund illustrates this structure. The fund is established as a Luxembourg SICAV while its investment strategy focuses on European real estate assets.

What Can a Real Estate Investment Fund Invest In?

Real estate portfolios can be structured in many different ways.

Residential Real Estate

This may include apartment buildings, rental housing or residential development projects.

Potential returns can depend on:

• occupancy;
• rental levels;
• demographic trends;
• financing;
• local housing markets.

Offices

Office assets can generate rental income from businesses but can also be affected by changes in working habits, employment and corporate demand for space.

Logistics

Warehouses and distribution centres may be influenced by:

• e-commerce;
• supply chains;
• manufacturing;
• trade;
• availability of strategically located land.

Retail

Retail property can include:

• high-street units;
• retail parks;
• shopping centres;
• other commercial premises.

Hospitality

Hotels and other hospitality assets can be more sensitive to:

• tourism;
• occupancy;
• business travel;
• operating costs;
• economic cycles.

Mixed-Use Property

Some assets combine several uses, such as residential, offices, hospitality and retail.

Diversifying across property types, locations and investment strategies may help reduce dependence on one specific segment.

See the key features and diversification approach of Makers fund for an example of this type of structure.

Which Is More Liquid: a SICAV or a Real Estate Investment Fund?

There is no universal answer.

A SICAV is not inherently liquid simply because it is structured as a SICAV.

Liquidity depends on what the fund owns and how redemptions are organised.

Liquidity of a Securities SICAV

A SICAV investing primarily in listed equities or liquid bonds may be able to buy and sell its underlying investments relatively quickly.

This can make regular redemptions possible.

However, liquidity should never be considered guaranteed.

During periods of market stress, a fund can face:

• unusually high redemption requests;
• reduced market liquidity;
• wider bid-ask spreads;
• difficulty selling certain positions;
• liquidity management measures.

The precise redemption rules are set out in the fund documentation.

Liquidity of a Real Estate Investment Fund

Physical property behaves differently from listed securities.

Selling an office building, hotel or residential asset can require:

• valuation;
• identification of a buyer;
• due diligence;
• negotiations;
• financing;
• legal documentation;
• completion of the transaction.

This process may take weeks or months.

A real estate investment fund therefore needs a liquidity structure that reflects the nature of its underlying assets.

Good to know

A fund being described as “open-ended” does not necessarily mean investors can recover their money instantly.

Redemption frequency, notice periods, limits and possible suspension mechanisms must always be checked.

Is a SICAV More Liquid Than a Real Estate Investment Fund?

Not necessarily.

A SICAV invested mainly in liquid listed securities may provide greater liquidity than a fund invested in physical property.

However, a SICAV invested in long-term or illiquid assets may itself have limited liquidity.

Examples include SICAVs investing in:

• real estate;
• infrastructure;
• private equity;
• private debt;
• other private-market assets.

Investors should therefore assess:

• redemption frequency;
• notice periods;
• minimum holding periods;
• redemption limits;
• possible exit charges;
• suspension mechanisms;
• liquidity of the underlying portfolio.

The legal structure should never be used as a shortcut for assessing liquidity.

How Does a SICAV Generate Returns?

The sources of potential returns depend on the investment strategy.

Equity SICAVs

Potential returns may come from:

• share price appreciation;
• dividends;
• currency movements.

Bond SICAVs

Potential returns may come from:

• interest income;
• bond price movements;
• credit risk premiums.

Real Estate SICAVs

Potential returns may include:

• rental income;
• real estate financing income;
• increases in asset values;
• realised gains when investments are sold.

A SICAV may distribute income to shareholders or reinvest it within the fund, depending on the relevant share class.

Distributions are not the same as guaranteed returns.

How Does a Real Estate Investment Fund Generate Returns?

Real estate funds can generate performance through several sources.

Rental Income

Properties may generate rents from tenants.

However, gross rental income does not equal the fund's net return.

Expenses can include:

• property management;
• maintenance;
• refurbishment;
• insurance;
• financing;
• taxation;
• periods of vacancy;
• other operating costs.

Property Appreciation

The value of real estate can rise or fall over time.

An increase in valuations can contribute positively to the fund's net asset value.

Falling property values can have the opposite effect.

Active Value Creation

Some strategies seek to improve properties rather than simply hold stabilised assets.

Value may potentially be created through:

• refurbishment;
• repositioning;
• changing the use of a property;
• increasing occupancy;
• renegotiating leases;
• redevelopment.

Makers fund combines Core/Core+ and Value-Added approaches as part of its European real estate investment strategy.

Any target return or distribution remains non-guaranteed.

What Fees Can Apply to a SICAV?

The SICAV structure does not impose one standard fee model.

Depending on the fund, fees may include:

• subscription fees;
• redemption fees;
• management fees;
• administration costs;
• depositary fees;
• transaction costs;
• performance fees;
• other operating expenses.

A SICAV investing in real estate may also incur costs directly related to real estate transactions.

What Fees Can Apply to a Real Estate Investment Fund?

Property investment can involve costs that are different from those of a traditional securities portfolio.

These may include:

• acquisition costs;
• due diligence;
• valuations;
• legal costs;
• property management;
• maintenance;
• refurbishment;
• financing;
• asset management;
• disposal costs.

Looking only at the annual management fee may therefore provide an incomplete picture.

Investors should assess the total cost structure over the expected holding period.

Makers fund sets out its current charging structure on its fees page.

Makers fund currently states that it does not charge an entry fee on the subscribed amount. Other fund and investment costs still apply, including management, administration, transaction, redemption where applicable and performance-related fees.

Good to know

0% entry fees does not mean 0% total costs.

Investors should review the KID and prospectus to understand the full impact of fees.

How Are SICAVs and Real Estate Investment Funds Taxed?

There is no single tax treatment that applies to all English-speaking investors.

Taxation depends on factors such as:

• the investor's country of tax residence;
• the fund's domicile;
• the legal and regulatory structure;
• whether income is distributed or accumulated;
• the type of assets held;
• whether shares are sold or redeemed;
• the investment account or wrapper used.

For this reason, the tax treatment of a SICAV should never be determined solely from the term “SICAV”.

Taxation of Distributions

Cash distributions may be taxable in the investor's country of residence.

Depending on the jurisdiction, they may be treated as:

• dividend income;
• investment income;
• foreign income;
• another category defined by domestic tax law.

Taxation on Redemption or Sale

Selling or redeeming shares may result in a taxable capital gain or loss.

The calculation and tax rate depend on the investor's local rules.

Foreign Fund Considerations

A Luxembourg SICAV held by an investor in another country may also raise questions regarding:

• foreign fund reporting;
• withholding taxes;
• double taxation treaties;
• tax reporting obligations;
• special rules for offshore or foreign funds.

Accumulating vs. Distributing Share Classes

Some tax systems tax investors differently depending on whether the fund:

• distributes its income;
• accumulates and reinvests it;
• qualifies under a specific domestic regime.

Investors should therefore check the rules applicable in their country of tax residence rather than applying tax information from another jurisdiction.

Good to know

A SICAV's legal form does not automatically determine the investor's tax treatment.

Tax rules can differ significantly between France, Germany, Spain, Portugal, the United Kingdom and other jurisdictions even when investors hold shares in the same fund.

Professional tax advice may be appropriate when investing cross-border.

What Are the Risks of Investing in a SICAV?

Risk depends on the investment strategy.

Market Risk

The value of the assets can fall.

A SICAV invested in equities may be particularly exposed to market volatility.

Credit Risk

A company, government or borrower may fail to meet its financial obligations.

Interest Rate Risk

Changes in interest rates can affect bonds, financing costs and asset valuations.

Currency Risk

Investments denominated in foreign currencies can be affected by exchange-rate movements.

Concentration Risk

A portfolio concentrated in a small number of:

• investments;
• sectors;
• countries;
• issuers

can be more sensitive to individual events.

Liquidity Risk

Certain investments may be difficult to sell within the expected timeframe or at an acceptable price.

Leverage Risk

Where permitted, borrowing can amplify both potential gains and potential losses.

What Are the Risks of Real Estate Investment Funds?

Real estate funds can also be exposed to risks specific to property investment.

Property Market Risk

Property values can decrease.

Changes may be driven by:

• economic conditions;
• interest rates;
• investor demand;
• local supply;
• financing conditions.

Tenant Risk

Vacancy or tenant defaults can reduce rental income.

Valuation Risk

Unlike listed equities, physical properties do not have continuously observable market prices.

Their value depends on periodic valuations and assumptions about factors such as rental income, yields and market conditions.

Financing Risk

Higher interest rates can increase borrowing costs and affect investment returns.

Liquidity Risk

Selling property can take time.

A fund facing significant redemption requests may not be able to sell assets immediately without affecting the sale price.

Development Risk

Refurbishment or repositioning strategies can involve:

• delays;
• cost overruns;
• regulatory issues;
• construction risks;
• leasing risks.

Concentration Risk

A fund concentrated in a single geography, property type or tenant can be particularly exposed to local developments.

Diversification may reduce certain concentration risks, but does not guarantee against losses.

Is the Capital Invested in a SICAV Guaranteed?

Generally, no.

The SICAV legal structure does not guarantee the value of the investment.

If the underlying portfolio falls in value, the net asset value of the SICAV can also decline.

Investors may receive less than their original investment.

The same applies to real estate investment funds.

Physical property is a tangible asset, but its value can still fall significantly.

What Is the Appropriate Investment Horizon?

A SICAV does not have one standard investment horizon.

It depends on the strategy.

Equity SICAVs

Equity strategies generally require a longer horizon because stock markets can experience substantial short-term fluctuations.

Bond SICAVs

The appropriate horizon depends on factors such as:

• duration;
• credit risk;
• interest rate sensitivity;
• the fund's objectives.

Real Estate Funds

Real estate is generally a longer-term investment.

Reasons include:

• relatively low liquidity;
• transaction costs;
• property market cycles;
• long-term leases;
• asset management programmes;
• the time required to sell assets.

Investors should check the recommended holding period stated in the Key Information Document.

Open-Ended vs. Closed-Ended Real Estate Funds

Real estate investment funds can be organised using different liquidity models.

The exact terminology and rules vary by jurisdiction.

Open-Ended Funds

An open-ended fund may allow investors to subscribe for and redeem shares during the life of the fund.

However, redemptions may still be subject to:

• notice periods;
• dealing dates;
• redemption caps;
• liquidity gates;
• suspension provisions.

Closed-Ended Funds

Closed-ended funds generally do not offer regular redemptions directly from the fund during their life.

Capital may remain invested until:

• the fund reaches maturity;
• assets are sold;
• the fund is liquidated;
• another transfer mechanism becomes available.

Semi-Liquid or Evergreen Structures

Certain long-term funds may operate between these two models.

They can offer periodic redemption windows while retaining restrictions designed to reflect the liquidity of the underlying assets.

The redemption model should always be considered alongside the nature of the investments.

What Is an ELTIF?

ELTIF stands for European Long-Term Investment Fund.

Unlike SICAV, ELTIF does not describe a legal form.

It is a European regulatory framework for long-term investment funds.

The ELTIF framework can cover investments such as:

• real estate;
• infrastructure;
• private companies;
• private debt;
• other long-term eligible assets.

A fund can therefore simultaneously be:

• a SICAV;
• an alternative investment fund;
• an ELTIF;
• a real estate investment fund.

Each term describes a different characteristic.

Read the complete guide to ELTIFs and how they work for more information.

SICAV vs. Real Estate Fund vs. ELTIF: What Is the Difference?

The same fund can potentially meet all three descriptions.

Makers fund is one example.

What Should Investors Compare Before Investing?

A fund should not be assessed solely on past returns or distribution targets.

1. Underlying Assets

Investors should understand what they actually own exposure to.

This includes:

• asset type;
• geographical markets;
• sectors;
• individual holdings.

2. Investment Strategy

Consider factors such as:

• Core, Core+, Value-Added or other approaches;
• active vs. passive management;
• use of leverage;
• diversification;
• target markets.

3. Liquidity

Review:

• redemption frequency;
• notice periods;
• minimum holding requirements;
• redemption caps;
• suspension provisions;
• expected settlement time.

4. Risk

Relevant risks may include:

• capital loss;
• market volatility;
• liquidity;
• credit;
• leverage;
• financing;
• concentration;
• real estate risks.

5. Costs

Review the total fee structure rather than focusing on one headline fee.

6. Investment Horizon

The fund's recommended holding period should be compatible with the investor's own liquidity needs.

7. Tax Treatment

Cross-border funds may have different tax consequences depending on the investor's jurisdiction.

8. Regulatory Documentation

Before investing, investors should review:

• prospectus;
• Key Information Document;
• annual and periodic reports;
• investment policy;
• fees;
• redemption rules;
• risk disclosures.

The official documents relating to Makers fund are available in the Makers fund documentation centre.

Can a SICAV Also Be a Real Estate Investment Fund?

Yes.

This is the most important takeaway from the comparison.

SICAV describes the corporate and legal structure.

Real estate investment fund describes the investment strategy and the nature of the underlying exposure.

A SICAV can therefore follow a real estate strategy and provide investors with exposure to property assets.

How Is Makers Fund Structured?

Makers fund is an alternative investment fund established as a Luxembourg SICAV and authorised as an ELTIF.

The fund is designed to provide eligible investors with indirect exposure to a portfolio of European real estate assets.

Its investment approach combines Core/Core+ and Value-Added strategies across different property types and European markets.

The strategy is designed around several potential sources of return, including income generation and long-term asset appreciation.

These objectives are not guaranteed.

Investing in Makers fund involves risks including:

• partial or total capital loss;
• real estate market risk;
• liquidity risk;
• valuation risk;
• financing risk;
• credit risk;
• regulatory risk.

More information about the portfolio approach is available in the Makers fund investment strategy, while the fund's regulatory materials are available in the documentation section.

SICAV vs. Real Estate Investment Fund: Summary Table