Property Funds Limiting Withdrawals

A number of unlisted property funds have begun limiting withdrawals.

The rise in interest rates, together with the continuation of the working from home phenomenon, means property valuations are under pressure. It is difficult to sell a property to fund redemptions at the valuation price.

Listed property trusts are dealt with savagely by the open market. Unlisted properties are manually revalued. The implication of course is that investors see many of these valuations as inflated and wish to exit at current prices, rather than being left “holding the baby” as everyone else takes their money.

Limitation of payments is legal and can be prudent. However, at some stage funds need to reduce their values to a level that will not encourage withdrawals. In turn that will have implications for many large superannuation funds which also hold significant unlisted property and infrastructure assets.