What next for property fund investors?

Two weeks ago we raised the alarm about property funds.  We have since posted our view of the risk to our website.  Other property fund managers have now followed Standard Life’s lead.

As always there are calming voices pointing out that the property market, as a long-term investment, remains secure.  They quote examples such as a typical pension fund portfolio that may have part of its asset allocation as commercial property, those asset allocations are not likely to materially change and about that we would not disagree.  However, what they don’t talk about, and there are many of them, are those investors who have disproportionately invested in property funds, some have 100% exposure to this single asset class.  Of those, a percentage of them are elderly and in pension drawdown, they are the ones who risk their lives being spoilt.

The nub of the matter is this – the long-term bull market in commercial property in the UK specifically and in other parts of the world as well, is over.  The risk caused by the illiquid nature of the property market has become very important and will cause great difficulties for those investors who are over-exposed as they try to rationally adjust their portfolios.  They won’t be able to do that without taking a potentially big hit.  We will regularly report on this developing situation.

For more on the commercial property market, see our investing in property pages.

By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.

For more from RHAM, visit https://www.rhasset.co.uk/


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