Fund suspensions “preferable” to distressed property sales

Financial advisers would prefer property funds to suspend trading if the alternative meant selling assets at distressed prices, research has found.

A report said the overwhelming majority of independent financial advisers surveyed preferred fund suspensions over a general sale of assets at distressed prices in order to meet daily liquidity demands.

The Association of Real Estate Funds (Aref) commissioned the report in the wake of last year’s UK property fund dealing suspensions following the Brexit vote.

However, the approach to the valuation of real estate assets in periods of volatility needs reviewing, the report said. There needed to be greater clarity in the valuation process in terms of market uncertainty as this is “vital to the future success of open-ended funds”.

Aref commissioned an independent consultant, John Forbes, to carry out the report in order to “ensure that the property funds industry continues to work in the best interests of its clients”.

Forbes, whose report is called ‘A review of real estate fund behaviour following the EU referendum’, said: “The regulatory and operating framework for retail investment in the UK in practice restricts retail investors to daily traded funds. Investors should have the choice to also invest in less liquid products, and those who choose to continue to invest in daily traded products need to be fully aware of the cost of liquidity, the risk that liquidity might not be available when they want it and the differences between funds.”

He said communication by fund managers and IFAs to their clients about these products needed to improve.

John Cartwright, chief executive of Aref, said the industry recognised this and that valuation processes could be made better.

©2017 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

CLOUD DATA PLATFORMS

Luxembourg is one of the world’s premiere centres for cross-border distribution of investment funds. Read our special regional coverage, coinciding with the annual ALFI European Asset Management Conference.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST