St James’s Place and Columbia Threadneedle have reopened their property funds, while the rest of the industry remains gated despite being given the green light to allow investors access to their cash.
Where does this leave investors? Where does it leave the property funds?
In a recent article in Investment Week, David Coombs, head of multi-asset investments at Rathbones discusses these very issues.
Coombs believes that greater innovation is needed within the UK property fund market to offer greater flexibility, diversification and protection for investors.
Coombs goes on to say that he is expecting substantial write-downs in the values of open-ended UK property vehicles when they eventually end their ongoing suspensions.
Reece Mennie is the CEO of Hunter Jones, the UK’s fastest growing property investment introducing firm says: “It is great to see confidence returning to the IA UK Direct Property sector and many people will be also delighted, others will have concerns about reopening funds prematurely, regardless of the Royal Institute of Chartered Surveyors (RICS) recommendation (RICS) that the clause be lifted, especially if a second coronavirus spike occurs.
“The pandemic was the very reason after all, for the creation of the “material valuation uncertainty clause”, which has left many hedge funds functioning in conditions that are far from “business as usual”, unlike say property bonds which have remained open and flourishing under conditions that can be best described as a buyer’s market.
“Going forward it is essential that fund managers reassure investors that the property market remains a stable investment option, and that the correct checks and balances are in place to safeguard their interests and also prevent a wave of investor redemptions.
“St James’s Place and Columbia Threadneedle reopening has put other wealth managers under severe pressure to follow suit, so we should hope that they have all taken the responsibility to ensure they have the cash reserves in place do to so. After all, maintaining investor confidence at the current time is a key priority”
The way forward
Coombs also says in his interview with Investment Week that greater choice is needed within the property fund market, such as that seen in the US market, where there is more variety in the strategy and size of property vehicles.
“In the UK, we have been stuck in these big commercial property funds that have a lot of London and regional office space, retail and industrial, and benchmarked to the [Investment Property Databank] index, which most have underperformed because of fees or in maintaining liquidity. There has been a lot of complete lack of innovation and a lack of specialism, they have all been mundane, broad exposures.”