Following Brexit, many investors rushed to get out of UK open-ended property funds, but the fall in prices could present an interesting opportunity for the brave investor.
After the EU referendum, the stampede to withdraw funds caused many property funds to suspend trading and there was much debate about the illiquid nature of the underlying asset and the prospect of falling prices.
But after the post-Brexit kneejerk reaction, markets have steadied and indeed risen, leading some to reappraise commercial property on a more measured and objective basis - and to recognise it as an asset class that still has attractive characteristics for long-term investors.
Certainly, the significant fall in the value of sterling could prove to be positive for the commercial property sector, as the 10% fall in sterling value provides an attractive entry point into the asset class, particularly for foreign investors, whilst a number of funds have seen confidence in particular from institutional investors.
Long-term investors who view property beyond its illiquid nature will recognise that, regardless of the post-Brexit negativity, property assets tend to be an excellent investment. Indeed, investors in property funds over the past four years would have seen pretty healthy returns, suggesting that the recent instability is more of a blip.
Property funds therefore can still have a role to play as a small part of a well-diversified portfolio, and the current situation means there is an interesting opportunity to enter the market at an attractive price.
Obviously, this is just a commentary not investment advice. To discuss your investment portfolio and the opportunities and risks associated with property funds, contact Kellands.