By Jim Pickard
It is only a few months ago that London's junior stock market, Aim, was allegedly described as a "casino" by a former commissioner at the Securities and Exchange Commission - a claim denied by the exchange.
That is a point of view shared - to a varying degree - by many observers. It is a common assumption that recently-floated real estate stocks on Aim are more risky than leading listed companies, such as British Land or Land Securities, which have decades of trading history behind them.
The nature of many of the new vehicles is fundamentally different to these established stocks. Many have much higher gearing. Some have external managements with remuneration structures similar to hedge funds.
Many are operating in countries that are relatively unfamiliar to investors and where market data is opaque.
Does this mean investing in them is akin to putting money on the roulette wheel? Only insofar as a casino is somewhere you can either make or lose large amounts of money.
One of the newer flotations, ironically, gives investors a chance to bet on the success of the casino industry in an exotic jurisdiction: Macau.
This former Portuguese enclave, just down the coast from Hong Kong, has long been the only place in China where gambling is legal. As a result, it is the Las Vegas of Asia.
An array of extraordinary new casinos has been springing up. Until recently Stanley Ho, a tycoon, had, in effect, a monopoly over the industry. But new licences have been issued in recent years to rivals including Steve Wynn and Sheldon Adelson, who are responsible for some of the most opulent gaming centres in Vegas.
Macau Property Opportunities Fund listed on Aim in June 2006.
Tom Ashworth, director of Sniper Capital, which sources and develops properties for the fund, says demand for flats, offices and retail space in the area, which is a Chinese SAR (Special Administrative Region), is likely to increase exponentially.
The fund has raised £105m, which, with modest gearing, gives it firepower of about £220m to spend on property projects. It has so far committed about 40 per cent of this money towards three schemes. One is a residential tower being developed by Hong Kong Land, which features a lake, clubhouse, luxury mall and Mandarin Oriental hotel. The other two are development sites on which it plans to build affordable housing for workers.
Land prices are rising and MPOF has committed to only three schemes out of more than 90 it has examined. "It is not difficult to find sites, but finding the sites with appropriate potential returns is bloody difficult," says Mr Ashworth.
Property prices in the territory are substantially lower than those in Hong Kong, 60km to the north.
As an indirect play on the fortunes of Macau - and indirectly on Chinese economic growth - the fund is an interesting bet.
But it is not the only way to gain exposure to the region's gambling industry. Investors could buy shares in Sands, Mr Adelson's company, or Melco PBLI Entertainment, both of which have licences. Mr Ho's Shun Tak Holdings, listed in Hong Kong, still has a strong business franchise in Macau.
Another Aim-listed vehicle also specialises in the region; Speymill Macau Property Company.
Furthermore, the Chinese government recently placed new restrictions on its citizens.
They are now allowed to visit Macau only once a month. It may seem unlikely now but a liberalisation of gaming in China itself could, potentially, undermine Macau.
And, as with many of the fund's peers, investors should realise that the success of MPOF will not take place overnight. As Mr Ashworth explains, the vehicle is driven by internal rate of return and is unlikely to pay a dividend for a long time.
"Less than 20 per cent of the foreign capital heading for Macau has been spent," he says. "This is going to be a five-year story, probably a 20 or 30 year story."
Investors should remember that MPOF and its ilk are more similar in style to a property opportunity fund - where investors need to wait out five or seven years for results - than a traditional company, he warns.