The commercial real estate market is undergoing a transformation: rental rates have stabilized after the correction, interest in real estate as a defensive asset is growing, and more private investors are seeking alternatives to traditional "brick and mortar" investments.
They face a classic choice: buy a physical property directly (direct real estate investment) or invest in a fund — a collective instrument managed by professionals.
To help our clients understand, we have prepared a detailed comparison across key parameters: returns, liquidity, entry threshold, control level, risks, and tax implications. We will also examine the most popular instruments today — REIT funds (exchange-traded real estate funds) and closed-end mutual funds (ZPIFs).
Key Differences Between the Approaches
The difference between direct property ownership and fund investments manifests at every stage — from entry to profit realization. Here are the main parameters to pay attention to.
Entry Threshold and Accessibility
Direct real estate investments traditionally require significant capital. Purchasing a commercial property in a major city costs millions of dollars, euros, or rubles, not counting additional expenses for registration, taxes, and legal support.
Investments in real estate funds make the market accessible to a broader range of investors. A share of an exchange-traded ZPIF can cost from 1,000 rubles, allowing you to start with any amount. In global markets, REIT shares trade on exchanges like ordinary securities — an investor can buy even a single share starting from a few dozen dollars. This fundamentally changes access to quality commercial real estate for private investors.
Liquidity
Real estate is a low-liquidity asset. Selling a property quickly and at market value can be challenging: finding a buyer, appraisal, and legal closing often take months. When there is an urgent need to sell real estate, an investor may face a forced discount of 20–30%.
Real estate funds, especially exchange-traded ones, offer high liquidity. REIT shares can be bought or sold on the exchange at any trading moment, like any other securities. Holders of exchange-traded ZPIFs can also exit their position by selling units through a broker. This provides flexibility and the ability to quickly reallocate capital when market conditions change.
Control Over Assets
Direct property ownership gives full control over the asset. The investor personally selects the location, sets rental rates, changes tenants, and decides when to sell the property. This control is the main advantage of direct investment, especially for large and experienced players.
With fund investments, the investor does not control specific assets. The fund is managed by a professional team that determines the portfolio composition, management strategy, and exit timing. The investor trusts the managers and agrees to standard terms for income distribution. In return, however, they are relieved of all operational and administrative burdens.
Risks
With direct ownership, all risks are concentrated in a single asset and fall on the investor: poor location, declining rental demand, tenant issues, rising maintenance and repair costs — all of these can significantly reduce ultimate returns.
Funds provide automatic risk diversification. The investor owns a share in a portfolio of dozens or hundreds of properties of different types and in different regions. Problems with a particular property or tenant do not have a critical impact on the entire portfolio. However, funds also have their own risks: market volatility (for exchange-traded REITs), the impact of interest rates on unit prices, and trust in the management company's competence.
Management and Time Commitment
Direct real estate is an active and time-consuming investment approach. The investor must independently find properties, verify legal title, find tenants, monitor payments, handle repairs and maintenance, pay taxes and utilities. In 2026, real estate requires even more active management than before.
Funds offer completely passive income. The management company handles everything: from sourcing and purchasing properties to collecting rent and distributing income to investors. The investor only needs to choose a fund and regularly receive dividends (from rent) and capital appreciation. This is the ideal choice for those who value their time and do not want to dive into the operational details of property management.
Transparency and Valuation
Direct real estate investments suffer from low transparency. The market value of a property is often unknown until sale, and valuation relies on subjective factors — the appraiser's opinion, comparisons with similar properties, etc.
Exchange-traded REITs offer maximum transparency and objective market valuation. The unit price is determined by the exchange in real time, and management companies are required to regularly disclose portfolio composition and financial performance. ZPIFs also provide regular reporting, though their unit prices are determined by the management company rather than the market.
REIT vs. ZPIF: What's the Difference?
Collective real estate investments come in two main formats: REIT (Real Estate Investment Trust) and ZPIF (closed-end mutual investment fund). Although they are similar in essence — pooling investor money for real estate investments — they have fundamental differences.
REIT Funds
REITs are public companies whose shares trade on stock exchanges. They own and manage income-producing real estate (shopping centers, offices, warehouses, data centers, etc.) and are required to distribute at least 90% of taxable income to investors as dividends. Over 25 years, as of 2026, REITs have delivered an average annual return of 12.3%, outperforming stocks, which returned 10.2%. At the same time, REIT volatility is significantly lower than stocks (standard deviation 11.4% vs. 15.8%). The dividend yield of REITs is about 4% — more than three times the dividend yield of the S&P 500. REITs are ideal for international diversification, as their shares trade on exchanges around the world.
Real Estate ZPIFs
A ZPIF is a fund that does not have legal entity status. Investor contributions are pooled to purchase real estate for a predetermined term. Unitholders own a share in the fund, while the management company handles operations. Unlike REITs, ZPIFs may not be available for daily redemption (units are often redeemed only at the fund's term-end), though in 2026 more ZPIFs are becoming exchange-traded, improving their liquidity. ZPIFs are particularly popular in Russia: in 2025, their net assets reached 893 billion rubles, and inflows into real estate ZPIFs hit a record 227 billion rubles for the year. In the first quarter of 2026, ZPIF management companies paid investors 18.3 billion rubles, 14% more than in the same period of 2025.
Comparison Table: Direct Real Estate, REIT, ZPIF
| Parameter | Direct Real Estate | REIT (Exchange-Traded Fund) | Real Estate ZPIF |
|---|---|---|---|
| Entry Threshold | High (millions) | Low (price of one share) | Low (from 1,000 rubles on exchange) |
| Liquidity | Low (months to sell) | High (instant on exchange) | Medium / High (if exchange-traded) |
| Control Over Assets | Full | None | None |
| Management Level | Active, manual | Passive (management company) | Passive (management company) |
| Risk Diversification | None (single asset) | High (portfolio of properties) | High (portfolio of properties) |
| Transparency and Valuation | Low (valuation until sale) | Maximum (exchange price, reporting) | High (regular reporting) |
| Time Commitment | High | Zero | Zero |
| Return Range | 4–12% annually (varies widely) | ~4% dividends + capital growth | Depends on fund, in 2026 — 16–30% annually |
| Jurisdiction | Any (country of the asset) | International | Primarily one country |
Note: Return data are based on 2026 information and are indicative. Past performance does not guarantee future results.
How to Choose the Right Format in 2026?
Choosing between direct investments and real estate funds is a matter of strategy, capital size, and personal preferences. Here are key scenarios to help you decide.
Direct Real Estate Investments Are Right for You If...
You have substantial capital (millions in the purchase currency), are willing to invest significant time in managing the asset or hire professional managers, understand the local real estate market, and are ready to bear the risks associated with a single property. You need full control over the asset, the ability to use it for personal needs, and you view real estate as a long-term capital preservation tool with a 10+ year horizon. You may also be interested in obtaining residency or citizenship by investment — many programs require direct property ownership.
Investments in Real Estate Funds (REIT/ZPIF) Are Right for You If...
You have a limited budget (from a few thousand dollars or even rubles) and want access to commercial real estate without large capital outlays. You need high liquidity and the ability to quickly exit (especially for REITs). You value your time and want passive income without operational management. You aim to diversify your portfolio across different property types and geographic regions — particularly relevant in today's global volatility. You may also consider REITs and ZPIFs as a tool for regular income through dividends (in the case of REITs) or interim distributions (in the case of ZPIFs).
Conclusion: Diversification as the Key to Success
Currently, there is no single answer to what is better — direct real estate investments or fund investments. Both approaches have their advantages and limitations, and the choice depends on the individual goals and capabilities of the investor.
Direct investments offer full control and potential for high returns but require substantial capital, deep knowledge, and significant time commitment.
Real estate funds open the market to a wide range of investors with any budget, offering professional management, high liquidity, and automatic risk diversification — but come at the cost of losing control and paying fees.
The optimal strategy for many investors is to combine both approaches. For example, invest in REITs for regular dividend income and quick liquidity, use ZPIFs for medium-term capital growth with tax benefits, and reserve direct real estate investments for large projects with long-term horizons and active management opportunities.
The IIG team is ready to help you select the optimal real estate portfolio structure for your goals, whether it's direct investments in international real estate, participation in REIT funds, or investments in ZPIFs. We support clients at every stage: from market analysis and instrument selection to legal transaction support and asset management.
Invest wisely, diversify smartly — and let your real estate investments work for you to their full potential.