From this month, investors in the open-ended UBS Triton fund who want to take out their money may have to wait up to two years. A queue of them wanting to redeem prompted a liquidity crisis that has led the fund to change its redemption policy so that the manager may defer redemption of units for 24 months.
Triton may or may not have to be wound up, but another fund, industrial specialist Falcon, definitely will, after CBRE Global Multi Manager and Aviva Investors Multi Manager decided they wanted out – and the other investors discovered the two multi managers had amassed 75% of the units.
Big is not always beautiful, but it is generally agreed that Falcon was too small, as were RREEF’s UK property funds, which had dwindled from £1.3bn five years ago to £335m when they were transferred this week to expanding rival BlackRock.
Funds needing to be wound up are nothing new, though there are a lot more of them both in the UK and on the continent – some in eurozone periphery countries, where there is nothing like as much liquidity in the property and debt markets as there is in the UK.
Neither is it new for capital to be reallocated, whether because of investor strategy changes or because the performance of the vehicles it invested in has disappointed. Both are a fact of life.
There is no feeling in the UK property market that this is a re-run of the very difficult time in 2007-2008 when investors deserted property en masse – in fact quite the reverse. These latest examples are about individual, fund-related, not asset-class related, issues.
However, the property fund industry must be careful that investors do not start to feel again that these situations are unpleasant surprises sprung on them suddenly or handled badly. Otherwise a lot of hard work over the past five years will be undone.
If that were to happen, it would become an industry-wide problem. The Association of Real Estate Funds published a report last January all about the lessons learned from the crisis, which now looks prescient.
Among the issues it highlighted as warranting further debate were liquidity and redemption policy and practice. It has now asked its investor committee to give feedback urgently and will be providing guidance to fund members about both redemption policy and fund terminations.
A year closer to recovery
Last year’s December leader was rather gloomy, but the verdict on property investment in 2012 seems to be that the outcome was better than expected.
Everyone knew 2012 would be a year of challenges and 2013 won’t be easy, but at the very least the market has moved one year closer to the end of a most difficult time, while some property investors have had a much better year than that. Thank you to all of our subscribers for your support this year and we hope you have a great Christmas break.