Investment groups managing £7.8tn are lobbying the UK government to introduce a fund structure that would make it easier for pension funds to invest in property without encountering the high-profile liquidity issues that have plagued retail investors in recent years.
The so-called “professional investor fund”, part of a submission from Britain’s top fund management trade body to the Treasury ahead of next week’s budget, is designed to boost the competitiveness of the UK fund industry post-Brexit by giving institutional investors greater flexibility over how they invest in real estate.
In a joint proposal published on Wednesday, the Investment Association and the Association of Real Estate Funds said there was “a clear gap” in the UK’s framework that puts the country at a disadvantage to international competitors.
Melville Rodrigues, partner at Charles Russell Speechlys and lead author of the IA proposal, said that investors looking for a hybrid strategy comprising elements of open-ended and closed-ended funds were being “forced offshore”. About 40 per cent of total fund assets invested in UK property are held in offshore funds, according to estimates from Property Funds Research.
Closed-ended funds are pools of capital comprising a fixed number of shares, whereas open-ended funds grow or shrink as investors move money in and out.
This feature of open-ended funds can have disruptive effects, as shown by the liquidity crises that have hobbled UK retail property funds in the past few years. The most recent fund to face a crunch was M&G’s £2.5bn Property Portfolio, which suspended trading in December after failing to keep pace with investor withdrawal requests.
Open-ended funds designed for professional investors offer less frequent liquidity to investors than retail funds, but their obligation to meet redemption requests nevertheless poses problems.
Stephen Palmer, director at DTZ Investors, which invests in property funds on behalf of UK pension funds, said that managing redemption requests could be a “distraction” for fund managers. In addition, the cash balances managers need to hold to meet withdrawals dilute returns.
Investing in closed-ended vehicles can also leave investors locked in a fund for a significant amount of time. Most property fund managers set time limits on their funds, but an increasing number are choosing to extend the duration of their funds, said Mr Palmer.
The IA and AREF proposal is for a closed-ended fund, units of which can be traded on the secondary market, without making investors liable for stamp duty land tax, as they are now.
Another way that investors can obtain exposure to property without facing the liquidity problems associated with open-ended funds is by buying shares in listed real estate investment trusts.
However, Mr Rodrigues noted that these vehicles do not always appeal to investors as they tend to move in the same direction as wider equity markets.
He added the proposed fund structure would “address the onshore fund gap and reduce barriers for new funds, enhancing the UK’s brand for fund and asset management”.
The new vehicle would also raise the profile of the UK internationally, positioning it as a base from where global property managers could manage funds for institutional investors, he said.
In its submission, the IA urged the Treasury to adopt its proposals — which also include the creation of a fund structure intended to give investors exposure to illiquid assets in return for less frequent trading terms — in order to “boost the global standing of the UK investment management industry” following the country’s withdrawal from the EU.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
