Investing in unlisted property funds in Australia offers a unique opportunity for portfolio diversification, capital growth and tax effective income. These funds, which are not traded on public exchanges, allow investors to pool their resources to invest in a variety of real estate assets. However, understanding the nuances of this investment class is crucial for making informed decisions.
In this article, we explore what unlisted property funds are, their benefits and risks, and important considerations to keep in mind when investing in them.
Unlisted property funds are investment vehicles that own and manage commercial real estate assets, such as office buildings, retail centres and industrial properties.
The characteristics of unlisted property funds are similar to owning a commercial property directly. The underlying assets are real properties, values don’t fluctuate daily like listed investments and it may take time to exit your investment. Given the underlying assets are the same, the return profile is similar – the potential for capital growth and a tax-effective income stream.
The key differences are the benefits. Unlisted property funds provide access to a diversified portfolio across multiple properties, locations and tenants, along with the expertise of professional management, which can reduce risk and enhance long-term outcomes.
Unlisted property funds share many characteristics with listed property funds, also known as Australian Real Estate Investment Trusts (A-REITs). Both invest in similar underlying assets and offer diversification and professional management. However, unlike A-REITs, unlisted property funds are not traded on the Australian Securities Exchange.
While this means unlisted property funds are generally less liquid and may take longer to exit, on the upside, they are not exposed to the daily price fluctuations and market volatility that listed investments often experience.
Typically, these funds are structured as trusts, allowing investors to purchase units that represent a proportional share of the fund’s assets and income. Returns are generally generated through net rental income and capital appreciation of the underlying properties in the fund.
Unlisted property funds can be open-ended or closed-ended, and this aspect of a fund influences how cash flows in and out of the fund, and also how the assets held by the fund may change over time.
Open-ended property funds
Open-ended property funds issue new units at the prevailing unit price to investors wanting to buy in. These funds must also make provision for investors to redeem their units for cash (or in other words, withdraw or exit the fund). A number of strategies can be employed to manage this. Funds may accumulate cash reserves to facilitate redemptions, and they may also require investors to apply for redemptions during scheduled ‘windows’. This enables an open-ended fund to plan cashflows and potentially sell assets in an orderly fashion, to fund redemptions.
If an open-ended fund accumulates enough cash from new investors as well as utilising debt facilities, it may buy more assets to add to the portfolio.
Fixed-term, closed-ended property trusts
Fixed-term, closed-ended property trusts, contain one or more properties that will be held for a specified time period. In most instances, terms range from five to ten years.
At the end of a trust’s term, the default outcome is that the trust’s assets are sold, the trust is wound up and investors are paid out. However, in certain circumstances, a trust may extend its original term.
Closed-ended trusts are considered illiquid investments and they, generally, do not provide a facility for investors to redeem their units for cash prior to the end of the term. These trusts are generally easy to understand, and there is more certainty around which property or properties will be held in the trust.
Often, a closed-ended trust will hold a single asset. While single-asset trusts don’t provide diversification on their own, initial investment is often as low as $10,000, meaning investors are able to combine multiple investments to diversify across manager, location and sector.
Benefits of investing in unlisted property funds
Investing in unlisted property funds can be an attractive option for diversifying a portfolio and accessing the real estate market without the hassles of direct property ownership. Outlined below are a few key benefits.
Direct access to property for a relatively small initial investment
Unlisted property funds allow investors to access commercial property with a much smaller upfront commitment than purchasing an entire property directly. Buying a single asset outright can cost hundreds of thousands, or more likely, millions of dollars. This often requires a seven or eight-figure purchase price, or, at minimum, a six-figure deposit and significant debt if financed.
In contrast, many unlisted property funds accept minimum investments as low as $10,000. By pooling these contributions with a debt facility, investors are able to participate in ownership of properties that would otherwise be well beyond their individual reach.
Diversification
Open-ended unlisted property funds typically provide access to a range of property assets diversified by tenant, tenant industry, and geographic location. This diversification helps to spread risk and reduce the impact of any single asset’s underperformance on the overall portfolio.
Alternatively, as mentioned, a small initial investment into a closed-ended (as well as open-ended) product allows investors to combine multiple funds into their portfolio to diversify across manager, sector, location and tenant.
Professional management
These funds are managed by experienced professionals who have the expertise to select, acquire, and manage properties. This allows investors to benefit from professional insights and strategies without having to directly manage properties themselves.
Beyond the question of professionalism, the practical effort required to manage commercial property can be prohibitive for many individuals. Owners are responsible for tenant management, negotiating lease agreements, overseeing capital works, arranging and maintaining insurance and many more tasks that demand both time and expertise.
Potential for stable income through regular distributions
Distributions are paid to investors on a regular basis, typically ranging from monthly to six-monthly payments. Distributions are primarily paid via net rental income from the fund’s properties.
This often appeals to investors seeking regular, reliable income. Additionally, tenants in commercial property assets are often locked into medium to long-term leases, which typically contain fixed price increases on an annual basis, thereby offering a degree of income predictability and in some cases protection against inflation.
Importantly, the reliability of income from a property fund can be affected by adverse market conditions, rising costs, or periods of vacancy.
Potential for capital growth
Investors share in any capital growth proportional to their holding in a fund. While investors are able to share in capital growth, they are also subject to any capital losses that may arise. Importantly, investors should be mindful that gearing amplifies both gains and losses.
Gearing is non-recourse to investors
Gearing is non-recourse to investors, meaning if there is a default, the issuer of the debt can seize collateral, but cannot seek out an investor for any further compensation. This reduces the risk to each individual investor and makes them available to self-managed superannuation funds (SMSFs). Although non-recourse is an advantage, high levels of gearing remains risky as it can magnify returns in both directions.
Tax-deferred (or tax-advantaged) income
Property funds often provide a tax-effective income opportunity. The income distributions you receive may include tax-deferred amounts due to non-cash deductions of tax concessions available to property funds.
Tax liability for these amounts is deferred until your units in the fund are redeemed and therefore subject to capital gains tax rather than income tax.
Depending on an investor’s marginal tax rate and individual circumstances, this may reduce the total tax that may otherwise need to be paid. A tax adviser should be consulted prior to any investment decision being made.
Considerations prior to investing in unlisted property funds
Like any investment, unlisted property funds come with certain considerations and risks that should be evaluated prior to an investment decision being made.
Consider economic and market conditions
Despite being considered less volatile than listed property investments, the value of the properties held by a fund can be affected by changes in the real estate market. Economic downturns can also impact the demand for commercial space, affecting fund performance.
Importantly, not all market developments can be predicted. For example, no one could have anticipated the COVID-19 pandemic, nor the profound impact it would have across different sectors of commercial property.
Understand the fund’s strategy
Each unlisted property fund has its own investment strategy, which can range from focusing on a specific property type to a diversified approach. Investors must ensure a given fund’s strategy aligns with their investment objectives and risk tolerance.
Management fees
Any management fees will impact the overall returns of a fund. It’s important investors understand the fee structure and ensure it aligns with their investment goals.
Evaluate the fund’s liquidity terms
As unlisted funds are not traded on public exchanges, they can be less liquid than other investments. This means it might be challenging to sell an investment quickly (open-ended funds) or at all (closed-ended trusts) if an investor requires access to their capital.
It is important for investors to understand the fund’s liquidity terms, including redemption policies and any lock-up periods. This helps investors to assess whether the investment aligns with their financial needs and time horizon.
Assess the track record
Review the performance history of a fund and its management team. While past performance is not a reliable indicator of future performance, a consistent track record may help investors assess how effectively a fund has managed risk and delivered returns over time.
Trilogy Industrial Property Trust
The award-winning Trilogy Industrial Property Trust (the Trust) exemplifies the potential of an open-ended unlisted property fund to deliver regular monthly income and long-term capital growth potential through strategic investment in industrial real estate assets. Managed by Trilogy Funds, the Trust focuses on acquiring and managing well-located industrial assets across Australia, targeting properties with strong tenant covenants and long lease terms.
The Trust’s portfolio includes warehouses, logistics hubs and light industrial facilities, sectors that have shown resilience and growth amid evolving supply chain demands and e-commerce expansion. Trilogy Funds’ experienced management team adds further value through active asset management and strategic acquisitions.
Unitholders benefit from monthly distributions, derived primarily from net rental income, with tenants often locked into long-term leases that include annual rent increases. The Trust also offers tax-effective income, with potential tax-deferred components due to depreciation and other non-cash deductions.
The Trust demonstrates the way in which unlisted property funds can offer a compelling blend of income, growth potential and diversification, particularly for investors seeking exposure to Australia’s industrial property sector without the complexities of direct ownership.
Trilogy Essential Retail Fund
Trilogy Funds’ newest investment product, the Trilogy Essential Retail Fund (the Fund), is another example of an open-ended unlisted property fund. The Fund has been set up to acquire assets in the exciting convenience retail, large format retail and essential services sectors. These are the centres that provide quick, convenient access to everyday essentials, as well as specialty categories like furniture, camping, hardware and pet care that require specialty expertise and product range that attract retail traffic. These centres often co-locate with other essential services such as medical centres and childcare services, which helps to optimise foot traffic.
In late-September 2025, Brighton Village in Western Australia was acquired to seed the Fund. Brighton Village is a high-quality retail asset based in the rapidly expanding city of Wanneroo. Tenanted by Coles and other essential service providers, the asset is positioned to deliver regular income with the potential for upside through asset enhancement and rental growth.
While our next formal capital raise will open as soon as we secure another compelling acquisition, there may be limited opportunities for new or additional investment in the meantime. Register your interest to stay informed and be among the first to hear when the next opportunity becomes available via the Trilogy Essential Retail Fund webpage.
Investing in unlisted property funds in Australia can be a rewarding way to diversify a portfolio and gain exposure to the real estate market. However, it’s essential to understand the benefits, risks, and considerations involved.
By carefully evaluating factors such as a fund’s strategy, track record, liquidity terms and market conditions, investors can make informed decisions and effectively navigate the complexities of unlisted property fund investments. It is important to consult a financial adviser prior to any investment decisions being made to ensure that these investments align with broader financial goals and risk appetite.
This article is issued by Trilogy Funds Management Limited ABN 59 080 383 679 AFSL 261425 (Trilogy Funds) as responsible entity for the Trilogy Industrial Property Trust (Trust) ARSN 614 682 469 and Trilogy Essential Retail Fund (Fund) ARSN 687 648 068. Application for investment can only be made on the application form accompanying the Product Disclosure Statement (PDS) dated 11 September 2023 for the Trust and PDS dated 22 July 2025 for the Fund. The PDS and Target Market Determination (TMD) for both products are available at www.trilogyfunds.com.au. The PDS contains full details of the terms and conditions of investment and should be read in full, particularly the risk section prior to lodging any application or making a further investment. All investments, including those with Trilogy Funds, involve risk which can lead to no or lower than expected returns, or a loss of part or all of your capital. Trilogy Funds is licensed to provide only general financial product advice about its products and therefore recommends you seek personal advice on the suitability of this investment to your objectives, financial situation and needs from a licensed financial adviser. Investments with Trilogy Funds are not bank deposits and are not government guaranteed. Past performance is no indicator of future performance.
