Deep Dive: A 'bleak' future but not a 'forgone conclusion' for open-ended property funds
'Let us not be fooled into thinking the challenges faced by the likes of M&G and St James’s Place render the future of these structures a foregone conclusion.'
Last month, the M&G Property Portfolio and WS Canlife UK Property ACS were suspended ahead of closure, with both managers noting sustained outflows that were unlikely to be reversed.
M&G global head of product and distribution Neal Brooks added the firm «does not foresee a future» for the open-ended direct property structure, a view reinforced by PortfolioMetrix UK head of investments Nic Spicer.
Open-ended property funds assert confidence following M&G closure as outflows mount
«Today's open-ended property funds do not have a future,» Spicer declared. «There is an inherent asset/liability mismatch in the structure, which is the feature that has dominated the news and taken up most column inches.
»This has only been exacerbated by Consumer Duty… you cannot offer daily dealing if you cannot deliver it."
He added there was a «great deal of confusion about how risky the funds really are», suggesting the traditional measure of volatility is not useful for open-ended property funds.
«In the case of physical property, estimated values from surveyors only update every few months and actual market transactions are very infrequent,» he explained. «As a result, it is not low risk that leads to lower volatility, but rather stale property prices.»
Spicer also argued the «clear alternatives» helped secure the death knell for open-ended property, although M&G's Brooks noted the firm had found no alternative that would offer investors a comparable product.
While Charles Allen, head of European real estate at Fiera Capital, noted the rumours of the structure's death «gathers
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