A few months after open-ended property funds were, not for the first time, required to halt redemptions, it is clear who the prime suspects are in the regulator’s call to stakeholders to “think carefully about the management of risk, particularly around redemptions”.
The publication, Illiquid Assets and Open-Ended Investment Funds, is open until May after which point the FCA may consider “regulatory intervention”. The question is, what exactly can it do?
“An equity fund manager doesn’t mind owning one share in BP, Shell or Apple, and yet a property manager has to own 100% of a building,” says Richard Philbin, CIO at Wellian Investment Solutions.
“If you want to create liquidity, you have to change the way that the asset is owned, bought or held in whatever legal structure it is in. If you are only going to value an asset once a month or once a quarter, they should only be priced on that basis.”
He suggests: “Maybe you could have daily pricing for inflows, and one month plus one day, or one quarter plus one day, for outflows. The property fund manager will see that they have money coming out and therefore make arrangements accordingly”.
