Investors in these funds have no option to redeem their interests. They are at the mercy of the sponsors. If their returns are lower, then their returns are lower, there are no guaranteed returns. (At least not in any of the 1/2 a dozen prospectuses that I’ve seen.) If the economy hasn’t picked up in 5-7 years, then the investors probably made lousy investments. They’ll sell at market value, but they’re not fools. If they have sufficient inventory to materially affect any local market, then they’ll put them on the market slowly so that they get market prices without reducing the market prices. They have absolutely no incentive to do anything else.[/quote]
That’s not how I understand it WRT redemptions, but will have to look into it more. Also, “market” value may well be much lower in 5-7 years (because of higher interest rates, lower investor demand, etc.), so it doesn’t matter how carefully they try to manage their assets, they can still lose money. Some will stay in bad investments, but others will want to cut their losses and move on. Whether or not the funds have to sell the houses, prices can still go much lower than they are today, IMHO.
