Time called on property’s party
July 14th, 2007
IN their quest for assets and fees, certain fund management groups appear to have few qualms about
luring retail investors lemming-like over a cliff. This is my way of explaining the behaviour of certain fund management groups which, over the past six months, have continued to hype up the virtues of commmercial property funds, even as the UK market nears or passes its peak.
There are strong parallels with the way in which fund management groups urged investors to pile into technology funds as the dot.com bubble stretched to bursting point in 1999-2000.
Any reader of publications such as FTfm would have realised that the writing was on the wall for UK commercial property funds by February 2007, if not before. Around that time, I wrote this article for a recently launched trade publication.
Yet the message has taken an astonishingly long time to filter through to the millions of punters who have continued to buy into commercial property funds. Some are already beginning to panic, and many fund managers believe the only way they will be able to stem a run on their property funds is by imposing hefty exit penalties (see FT article Price cuts spark fears of mass withdrawals ). I expect we’ll see some funds closing the exit door before the middle of next year.
I certainly don’t welcome the fact that the UK commercial property market has peaked. What I do deplore is the cynicism of the fund management groups that have continued to actively flog such funds (and even to launch new commercial property funds) to retail investors, even though they were well aware this market was past its prime.
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