Key Takeaways
- Two liquidities, not one: a listed real estate fund is liquid in its units – you can sell them on the exchange any day – but illiquid in its assets: selling a building takes months. The whole subject lies in that gap.
- The redemption right: an investor can demand repayment of their units at net asset value, but only for the end of a fiscal year and with twelve months' notice (art. 66 CISA). The "at NAV" exit exists, but it is slow.
- The exchange listing: the law requires the fund to ensure regular trading of its units, on or off exchange, through a bank acting as market maker (art. 67 CISA). That is what provides the daily liquidity – at the market price, not at NAV.
- Two exits, two prices: sell today on the exchange, at the current price (carrying a premium or discount), or redeem at NAV while waiting up to nearly two years. The premium or discount is the price of immediacy.
- The real risk: in times of stress, the exchange stays open but the price can fall to a deep discount. The liquidity of the units is preserved in quantity, not always in price – a decisive distinction.
- Key reflex: know which liquidity you hold (the units', not the buildings'), know the two exit routes and their prices, and read the gap to the market price as the cost of being able to sell right away.
Introduction
"Listed" suggests a reassuring promise: the ability to sell whenever you want. For a listed real estate fund, that promise is true – but it does not cover what people think. You can sell your units on any trading day; you cannot, for all that, make the fund sell a building on any given day. Between the liquidity of the unit and the illiquidity of the building opens a gap that defines how these vehicles work.
That gap is not a flaw: it is the whole point of the listed fund. It lets an investor enter and exit an asset – real estate – that, held directly, trades in months and notarized deeds. But it also creates situations that only a precise reading of the law and of market mechanics can explain: why there are two ways to exit at two different prices, why the law imposes a year's notice, and why a fund perfectly liquid on the exchange can still inflict a heavy loss on whoever sells at the wrong moment.
This article separates the two liquidities, describes the two exit routes and their legal framing, and shows where the risk really sits. The scope is structural and timeless. It builds on our article on net asset value and extends the one on agio and disagio, whose deeper cause it illuminates.
Two Liquidities That Must Not Be Confused
For a real estate fund, the notion of liquidity covers two distinct realities that are wrongly lumped together.
The liquidity of the units measures how easily a holder can turn their units into cash. For a listed fund, it is high: the units trade on the exchange, continuously, like a stock.
The liquidity of the assets measures how easily the fund can turn its buildings into cash. It is low, by nature: an investment property sells over several months, after a negotiation, with high transaction costs, and at a price never known in advance – only estimated by experts, as our NAV article recalls.
All the ingenuity – and all the fragility – of the listed real estate fund lies in the coexistence of these two opposing liquidities: a liquid wrapper over an illiquid content. The exchange acts as a buffer between the two, but it does not turn the content into cash; it merely transfers the units from one investor to another.
The Redemption Right: Exit at NAV, but Slowly
Swiss law grants the investor a fundamental guarantee: they can demand repayment of their units. But this right is deliberately slow. The law provides that a holder may give notice on their units for the end of a fiscal year, with twelve months' notice (art. 66 CISA). The fund then pays them the net asset value – the true value of their share of the buildings, net of debt.
This delay is not administrative harassment: it is a protection. It prevents a rush of redemption requests from forcing the fund to dump its buildings in a hurry, to the detriment of the holders who remain. By imposing a long notice period, the law protects the community of investors against forced sales – at the cost, for the one exiting, of a wait that can approach two years depending on when notice is given. The ordinance allows the fund to redeem early after the year-end close, if it can and if all requesters can be satisfied (art. 98 CISO), but it is never an immediate entitlement.
The Listing: Daily Liquidity, at Another Price
So that the investor is not held prisoner by this notice period, the law requires a second mechanism. The fund management company must ensure regular trading of the units, on or off exchange, by mandating a bank or dealer that acts as market maker (art. 67 CISA). It is this arrangement that gives the listed fund its daily liquidity: at any moment, a holder finds a counterparty and sells their units the same day.
But this liquidity comes at a price different from NAV. On the exchange, the unit does not trade at its net asset value; it trades at the market price, set by supply and demand. That price embeds a premium (agio) or a discount (disagio) against NAV – the gap our dedicated article analyzes. Selling on the exchange therefore means selling immediately, but at a price that can be above or below the intrinsic value of one's share.
Two Exits, Two Prices
The investor thus has two exit routes, which trade off against each other.
| Exit route | Price obtained | Timing |
| Sale on the exchange | market price (NAV ± premium/discount) | same day |
| Redemption with the fund | net asset value | fiscal year-end, 12 months' notice |
These two prices are not independent: it is precisely the existence of the redemption right at NAV that keeps the market price from drifting away from it indefinitely. If the discount grows too deep, exiting through redemption becomes more attractive than selling on the exchange, which creates a pull back toward NAV. The redemption right acts as a distant anchor; the exchange, as a short-term thermometer. The premium or discount measures, at every moment, what the market is willing to pay – or to sacrifice – for the convenience of not waiting twelve months.
Where the Risk Sits
The risk of the listed real estate fund is therefore not being unable to sell: the exchange stays open. It is selling at a bad price. In times of stress on income assets, the market price can fall to a deep discount, while the NAV, smoothed by the experts' appraisal method, moves more slowly. The liquidity of the units is preserved in quantity – there is always a buyer – but not necessarily in price: the buyer only agrees at a discount.
This is an essential difference from certain open-ended real estate funds in other countries, which promise permanent redemption at net asset value and then find themselves forced to suspend repayments when too many investors exit at once – unable to sell the buildings fast enough. The Swiss model, by routing liquidity through the exchange rather than through the fund's balance sheet, shifts the risk: it does not suspend the exit, it adjusts its price. For the investor, the practical consequence is clear – the question is never "will I be able to sell?" but "at what gap to intrinsic value?"
In Practice
Three reflexes are enough to navigate this dual liquidity.
- Know which liquidity you hold. The units', not the buildings'. A fluid market price does not mean the fund could liquidate its portfolio quickly; the two are unrelated.
- Choose your exit route knowingly. Sell on the exchange for immediacy, accepting the premium or discount of the moment; or give notice on your units to receive NAV, accepting the delay. The gap between the two prices is the cost – or the benefit – of speed.
- Read the discount as a signal, not a fate. A deep discount can reflect market pessimism as much as a NAV lagging reality. Our annual-report reading guide and the one on agio and disagio help tell the two apart.
Conclusion
The liquidity of a listed real estate fund is real, but it applies only to the units, never to the buildings. The law organizes this liquidity in two stages: a redemption right at net asset value, slow and protective, and daily exchange trading, fast but at a market price that drifts from NAV. One anchors the value, the other offers the convenience; their coexistence explains both why "listed" keeps its promise and why that promise does not say what people think.
Understanding this architecture means ceasing to confuse the fluidity of a quoted price with the liquidity of a property portfolio, and reading the gap between the market price and the net asset value for what it is: not an anomaly, but the continuously set price of being able to turn bricks into cash without waiting for the bricks themselves to sell.