Taking stock after the open-ended property fund closures

Real Estate Report: Taking Stock After the Open-Ended Property Fund Closures


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Summary: Now the initial redemptions turmoil has eased, Kate Binedell, Stephan Krampe and Adnan Bhaiji provide an informed view of the impact, key opportunities and lessons we can learn from the German experience.

The Market Context

Units in retail funds can be redeemed on a daily basis, but are valued monthly, creating a potential discrepancy between the current redemption price and the perception of what the price will be when the new valuation is applied. 

Following the Brexit vote, several open-ended retail funds were forced to suspend redemptions to deal with the high volume of requests, as investors worried about the outlook for UK real estate. 

Assessing the Near-Term Impact

Regulation: a change of approach? 

Under the existing regulatory environment, fund managers, by most accounts, have done the right thing to protect al their investors, averting a possible run on the funds by using the tools at their disposal, such as gating redemptions, applying fair value adjustment mechanisms and charging redemption levies. Most of the funds maintain 15-20% liquidity, but the sheer volume of redemptions had....

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