It reiterated its warning of last year as several UK authorised unit trusts have recently increased the exit costs for investors wishing to leave the funds, after confidence fell.
Standard Life, Prudential, Norwich Union and New Star have all raised the cost of exiting their property funds in the last fortnight. Assetz said this move highlights the fact that property is an illiquid asset, as Fund Managers act to protect remaining fundholders by covering the costs of selling property assets, to cover redemption payments.
In Germany last year, German Open property funds closed for redemptions for a period in response to a mis-valuation scandal, which prompted substantial numbers of investors to redeem their investments. Assetz stated if substantial numbers of investors wanted to leave UK authorised unit trusts, this could well happen over here.
Stuart Law, chief executive of Assetz, commented: “Property as an asset class is generally illiquid and investors have one of two choices to make when investing in property. They can either demand true liquidity and invest in a REIT, where the liquidity is provided by the stock exchange rather than the fund provider (but the investment acts more like an equity), or they can invest in a low running cost closed property fund that does not purport to treat property is a short-term investment, but rather tends to be for fixed periods of at least five to seven years. Authorised unit trusts are a halfway house and one of their shortcomings has just been exposed.”
