1.05.2016 Property Funds

1.05.2016 Property Funds

New waves of outflows are taking place as investors rush to withdraw cash from property funds. Beginning of the year witnessed more outflows then during the entire 2008. In a knee jerk reaction, the major market players in the open ended funds universe do everything to make sure investors receive less in withdrawals then expected. This is a normal reaction because it costs large asset managers dearly to free up the cash form illiquid assets when they face net redemptions. Keep in mind that when such large outflows are taking place the cash reserves are rapidly depleted and to meet the withdrawing demand the managers are forced to actually sell the physical assets. Some of these assets are not yet profitable as they were meant to be invested in for a long term. Instead of focusing on the “greedy” managers attention should be paid and questions asked about the actual urge to withdraw. Reasons for this are not clear. Perhaps Brexit has something to do with it, otherwise this is a normal course of business as investors are capitalising on their early investment and if the Brexit does take place they will buy into the lower prices all over again. Sell high – Buy Low, this is economics 101.

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