Tokenised vs Traditional REITs: Swiss Real Estate Investment Comparison

The emergence of tokenised real estate investment raises a fundamental question for Swiss investors: does tokenisation offer genuine structural advantages over the established framework of listed real estate funds and companies, or does it merely repackage familiar property exposure in a technologically novel wrapper?

This comparison examines the two models across the dimensions that matter most to investors — returns, costs, liquidity, governance, and risk — to provide a framework for informed allocation decisions.

Structural Comparison

Traditional Swiss Real Estate Securities

Switzerland’s established real estate investment vehicles include:

Listed real estate funds — Regulated under the Collective Investment Schemes Act (CISA), managed by FINMA-authorised fund management companies, and listed on the SIX Swiss Exchange. These funds hold diversified portfolios of Swiss property, distribute income to investors, and trade at premiums or discounts to net asset value.

Listed real estate companies — Publicly listed corporations (Swiss Prime Site, PSP Swiss Property, Allreal, Mobimo, Zug Estates) whose primary business is property ownership, management, and development. Subject to standard corporate regulation and taxation.

Unlisted real estate funds and investment foundations — Non-listed vehicles providing institutional investors (particularly pension funds) with professionally managed property exposure.

Tokenised Real Estate

Tokenised property platforms issue blockchain-based tokens representing interests in individual properties or small portfolios, structured through:

• Security tokens complying with the DLT Act
• Fractional ownership interests in property-holding SPVs
• Debt tokens secured against real estate assets
• Hybrid instruments combining equity and debt characteristics

Dimension-by-Dimension Comparison

Liquidity

Traditional REITs and funds:

• Daily liquidity on the SIX Swiss Exchange
• Robust market-making and institutional order flow
• Average daily trading volumes of CHF 5–50 million for major vehicles
• Bid-ask spreads of 0.1–0.5 per cent for liquid securities
• Large institutional trades can be executed with manageable market impact

Tokenised real estate:

• Secondary market trading available on selected DLT trading facilities and decentralised exchanges
• Trading volumes are typically thin — often fewer than a handful of trades per day
• Bid-ask spreads can be substantial (2–10 per cent or more)
• Large positions may be impossible to liquidate without significant price impact
• Some platforms offer periodic redemption windows rather than continuous trading

Assessment: Traditional vehicles hold a decisive advantage in liquidity. For investors who may need to access their capital on short notice, listed real estate securities are materially superior. Tokenised real estate liquidity may improve as the market matures, but this remains prospective rather than demonstrated.

Minimum Investment

Traditional REITs and funds:

• Listed fund units and company shares can be purchased for as little as CHF 50–500 per unit
• Effective minimum is determined by brokerage minimum order sizes, typically CHF 500–1,000
• No meaningful barrier to small-scale investment

Tokenised real estate:

• Minimum investments range from CHF 100 to CHF 50,000 depending on the platform
• Some platforms advertise minimums as low as CHF 100
• KYC/AML onboarding requirements may create a practical friction barrier

Assessment: Both models offer low minimum investments, though listed securities are marginally more accessible due to the absence of platform-specific onboarding requirements. The tokenisation sector’s emphasis on low minimums as a differentiator is somewhat overstated, as listed fund units already provide affordable entry.

Diversification

Traditional REITs and funds:

• A single fund unit provides exposure to 50–200 properties across multiple locations and property types
• Sector and geographic diversification embedded in the portfolio construction
• Correlation benefits from holding multiple properties reduce portfolio-level risk

Tokenised real estate:

• Most tokenised offerings provide exposure to a single property or a small number of properties
• Concentration risk is inherent in the single-property model
• Achieving comparable diversification requires investing across multiple platform offerings, with associated complexity and cost

Assessment: Traditional vehicles provide superior diversification per unit of investment. Tokenised platforms require investors to actively construct diversified portfolios across multiple offerings, which is both more complex and more costly.

Fees and Costs

Traditional REITs and funds:

• Listed fund management fees: 0.5–1.0 per cent of NAV per annum
• Listed company management costs: embedded in operating expenses (typically 0.5–0.8 per cent of NAV)
• Trading costs: brokerage commission (0.1–0.3 per cent) plus Swiss stamp duty (0.075 per cent for domestic securities)
• No entry or exit fees for exchange-traded vehicles

Tokenised real estate:

• Platform fees: 1.0–3.0 per cent upfront issuance fee plus 0.5–2.0 per cent annual management fee
• Token trading costs: blockchain gas fees plus any exchange commission
• Some platforms charge performance fees (10–20 per cent of returns above a hurdle)
• Exit fees may apply for platform-facilitated redemptions

Assessment: Traditional vehicles are generally more cost-efficient, particularly for long-term holdings. The higher fee burden of tokenised platforms reflects both the smaller scale of operations and the additional costs of blockchain infrastructure and regulatory compliance. As the tokenised market scales, fee compression is likely but not guaranteed.

Transparency and Reporting

Traditional REITs and funds:

• Semi-annual and annual reports with audited financial statements
• Independent property valuations at least annually
• Regulatory reporting to FINMA and stock exchange
• Analyst coverage for major listed vehicles
• NAV published regularly (daily for listed funds)

Tokenised real estate:

• Blockchain-based transaction records providing real-time ownership and distribution data
• Property-level reporting varies significantly by platform
• Independent valuations may or may not be conducted regularly
• Limited or no analyst coverage
• Limited standardisation of reporting formats

Assessment: Both models have strengths. Traditional vehicles provide more comprehensive, standardised, and audited reporting. Tokenised platforms offer real-time blockchain transparency for ownership and distributions but may lack the depth and auditability of traditional reporting. The optimal answer is likely a convergence of both approaches.

Governance

Traditional REITs and funds:

• Listed companies: shareholder voting at annual general meetings
• Listed funds: limited governance rights, delegated to the fund management company
• FINMA oversight of fund managers
• Stock exchange listing requirements for disclosure and corporate governance

Tokenised real estate:

• Smart contract-embedded governance for specified decisions
• Token holder voting mechanisms (where implemented)
• Platform-dependent governance quality
• Less standardised governance frameworks

Assessment: Traditional vehicles provide more established and standardised governance, backed by decades of regulatory development. Tokenised platforms offer the potential for more direct, real-time governance through smart contracts, but this potential is unevenly realised across platforms.

Tax Efficiency

Traditional REITs and funds:

• Listed real estate funds benefit from tax transparency (no corporate-level taxation on direct property income)
• Listed companies are subject to corporate taxation, creating double taxation on dividends
• Well-established and predictable tax treatment

Tokenised real estate:

• Tax treatment depends on the specific token structure (equity, debt, hybrid)
• The tax treatment of token distributions is generally clear but less tested than traditional structures
• Cross-border tokenised investments introduce additional tax complexity (e.g., RealToken US property)
• Some uncertainty regarding the tax characterisation of novel token structures

Assessment: Traditional vehicles, particularly listed real estate funds, offer the most tax-efficient structures for Swiss investors. Tokenised platforms must demonstrate equivalent tax efficiency, which requires careful structuring and may involve higher compliance costs.

Convergence Scenarios

Traditional Vehicles Adopting Tokenisation

Several scenarios for convergence are emerging:

• Listed real estate funds issuing tokenised units alongside traditional fund units
• Real estate companies maintaining blockchain-based share registers
• Established fund managers launching tokenised product lines
• Traditional secondary markets integrating DLT settlement

Tokenised Platforms Adopting Traditional Features

Equally, tokenised platforms are developing capabilities associated with traditional vehicles:

• Portfolio diversification across multiple properties
• Institutional-grade custody and reporting
• Regulated secondary market trading on DLT trading facilities
• Professional fund management and governance

Investor Decision Framework

The choice between tokenised and traditional real estate investment depends on the investor’s priorities:

Choose traditional REITs/funds if:

• Liquidity is important (you may need to sell within days or weeks)
• You prefer established, well-tested investment structures
• Tax efficiency is a priority
• You value institutional-grade governance and reporting
• You seek broad diversification within a single investment

Choose tokenised platforms if:

• You seek exposure to specific individual properties
• You are comfortable with limited liquidity and longer holding periods
• You wish to participate in the development of tokenised real estate markets
• You have the capacity to conduct property-level due diligence
• A modest allocation within a broader portfolio context is appropriate

Consider both if:

• You seek comprehensive real estate exposure combining different return sources
• You want to diversify across investment structures as well as properties
• You have the capacity to manage a more complex portfolio

Conclusion

The comparison between tokenised and traditional Swiss real estate investment reveals a market in transition. Traditional vehicles remain superior on most practical dimensions — liquidity, cost efficiency, governance, and track record. Tokenised platforms offer genuine innovation in accessibility, transparency, and the potential for programmable compliance, but these advantages have not yet translated into superior risk-adjusted returns for investors.

The most probable outcome is convergence: traditional vehicles will increasingly incorporate blockchain technology for operations and record-keeping, whilst tokenised platforms will develop the portfolio diversification, governance, and regulatory compliance characteristics of established vehicles. The investor who understands both models is best positioned to benefit from this evolution.

Donovan Vanderbilt is a contributing editor at ZUG ESTATES, the real estate intelligence publication of The Vanderbilt Portfolio AG, Zurich. He covers real estate investment structures, fintech innovation, and the comparative analysis of traditional and digital property investment vehicles.