How things have change in a little over 12 months for property funds in the United Kingdom. Immediately after the vote to leave the European Union in 2016 many property funds went through tough times, with many open-ended property funds closing due to redemption as they struggled to sell property to raise the cash needed.
But as the saying goes “tough times don’t last tough people do” and the same can be said for property funds.
According to recent research from the Association of Investment Companies (AIC) demand for property funds has seen record sales in the past 6 months.
Laith Khalaf, senior analyst at Hargreaves Lansdown, which does not include any investment trusts on its Wealth 150 list of favorite funds, said an investment trust structure partly mitigates the issues experienced with property funds, because the secondary market in investment trust shares provides investors with liquidity that some open ended funds cannot deliver in periods of stress.
However there is still usually a price for that liquidity in the form of a widening discount, he said.
“The main benefit of the closed-ended structure for commercial property investment is from a fund management perspective,” he said.
“With no outflows to worry about, managers can get on with their job without looking over their shoulder, and don’t have to carry a high cash weighting to meet withdrawals in the event of an exodus from the sector.”
The AIC data showed £514m of capital was used to buy investment trust shares in the first six months of the year.
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