Property investors may wish to consider derivatives to hedge against risk, the Financial Times has said.
Those involved in commercial
property investment could make use of property derivatives to hedge exposure, cushion themselves against crashes and predict the future of the market, it has been suggested.
Property derivatives are linked to the Investment Property Databank index, which tracks commercial property returns, the Financial Times reports.
As the minimum derivative trade stands at around £1 million, they are best-suited to private investors with large commercial property portfolios, although they may also affect buy-to-let landlords.
"If you're in the business of holding property assets and recognise that property is cyclical, at certain times it follows that you're going to want to reduce or increase your exposure," Dominic Smith, group research manager at Land Securities, told the paper.
The Financial Times reported recently that the property derivatives sector was badly hit by the recession, but may come into its own in the recovery as investors seek ways to hedge out risk.
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