Open-ended property funds - update

Some suspended property funds are set to re-open, however others could remain closed to dealing for some time.

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  1. Rob Morgan

Some suspended property funds are set to reopen following new guidelines on valuations, providing the opportunity for investors to place trades.

Funds suspended dealing at the height of the coronavirus crisis in March after independent property valuers invoked a ‘material uncertainty clause’. However, the Royal Institution of Chartered Surveyors have now recommended the lifting of such clauses in the majority of cases. This allows the values of most commercial property assets, and for the net asset values of funds, to be stated with more certainty.

So far, Columbia Threadneedle has confirmed the Threadneedle UK Property Authorised Investment fund (PAIF) and its ‘feeder’ fund, the Threadneedle UK Property Authorised Trust, will reopen on 17 September 2020. However, other fund houses have said they need more time to assess the risks of ending their suspensions.

Funds containing significant quantities of cash will be more likely to open and allow redemptions. Those with smaller amounts of cash and/or portfolios containing larger proportions in the more problematic areas such as retail and leisure may find it more difficult. They will want to avoid a scenario whereby significant redemptions by investors force another suspension in a short time period.

In addition, some fund groups may take a more cautious view in relation to the uptick in Covid-19 cases and any possible Brexit upheaval. Although the removal of material uncertainty clauses allows the reopening of funds there is no obligation, and they may not consider this to be in the overall interests of all investors in the fund at this time.

Adding to the uncertainty for investors in open-ended property funds, the Financial Conduct Authority has unveiled proposals that would require investors to wait up to six months to get their money out in order to help address the ‘liquidity mismatch’ of regularly-dealt investment funds owning hard-to-trade assets. The imposition of notice periods may mean they are less popular with investors, and the end of daily dealing may even mean they are excluded from ISAs or SIPPs in the future. We await the outcome of a consultation on these proposals.

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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