This week’s gating of the M&G Property fund has reignited the debate between whether commercial property funds should be daily dealing or not. And even though the press coverage has been as high as the Woodford debacle, it’s much less controversial. Unlike equity funds, commercial property funds are inherently much more illiquid and harder to chop and change. Brexit uncertainty has meant that transaction volumes have languished at recent lows. With few buyers or sellers, property funds are even more vulnerable to a run. The need for prudent liquidity management is becoming ever more important.
What we could query however, is the high level of retail exposure within the direct property space. High streets are dying out in favour of online shopping. Even then not all retail exposure is bad, owning supermarkets or warehouse centres for the likes of Amazon is beneficial. What we really could question is if some of the funds could have sold down their bad retail exposure sooner and not during a time of stress.
Read more weekly news from our investment partners Financial Express here.
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