Property Funds

Update on the recent suspension of investment property funds

Uncertainty generated by the European Union referendum has had a negative effect on market sentiment and led to substantial withdrawals from property funds. A cash liquidity buffer is typically held to meet redemptions but the pace and size of redemptions has increased to abnormally high levels following the referendum result. This has put exceptional liquidity pressure on the Fund, exacerbated in recent days by the suspension of other direct property funds.

Transactions in physical property can be a lengthy process given the need to make offers, match buyers and sellers, undertake due diligence and the necessary legal work. It is important that property transactions are conducted in an orderly and considered manner so that the fund managers achieve the most reasonable deal for investors in the Fund (and indirectly the Feeder), including those investors who wish to remain invested for the medium to long term.

The dealing suspension will allow for an orderly sale of some properties and help ensure that the strong attributes of the portfolio in terms of its mix of properties and quality tenant base are not compromised while cash liquidity is raised ahead of a re-opening of dealing in the funds.

We believe that property remains a very attractive investment and that UK investors will continue to want exposure to this asset.

Many of our clients have property funds as part of a diversified investment approach and our maximum recommended holding is 8%.

We do not believe that the current withdrawal of investors from commercial property funds will have a significant long term effect on our client’s wealth.

We are therefore recommending that our client maintain their current holdings.

We all continue to monitor this position and advise on appropriate changes if necessary.