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Press Release

Real Estate Funds: The lessons learned from the EU Referendum

  • The real estate funds industry treated investors fairly and reacted in the best interests of its clients during the period of volatility following the EU Referendum result
  • The regulatory framework broadly operated as intended, but improvements can be made
  • The limitations imposed by the regulatory and operational framework for retail investment have restricted choice to daily traded products
  • AREF is ready to drive change to ensure that open-ended funds continue to work in the best interests of consumers

To ensure that the property funds industry continues to work in the best interests of its clients, the Association of Real Estate Funds last year commissioned independent consultant John Forbes to assess the impact of the EU referendum result on the real estate market and evaluate whether any improvements could be made.

Following the Referendum, a number of funds suspended trading to protect existing clients during a time of unprecedented market uncertainty. There was a lot of media attention and debate around whether suspension was the best course of action.

Published today, the John Forbes Report entitled ‘A review of real estate fund behaviour following the EU referendum’, concluded that although there are some areas for improvement, fund managers limited the impact of events and sought to treat investors fairly.

The report also highlights that despite a wide range views amongst market participants, the overwhelming majority of IFAs surveyed preferred fund suspension over a general sale of assets at distressed prices in order to meet daily liquidity demands.

Despite consensus that the industry and regulatory framework operated appropriately in its current form, John Forbes’ concluded that there are areas where regulation of retail investment in real estate should be reviewed and improved.

One particular area that the report suggests needs addressing is the approach to the valuation of real estate assets in periods of volatility. The report calls for industry bodies and the regulator to work in harmony to ensure that there is greater clarity in the valuation process in terms of market uncertainty as this is vital to the future success of open-ended funds.

John Cartwright, Chief Executive of AREF, said:

“Open-ended property funds offer investors of all shapes and sizes access to an asset class that they would otherwise be unable to, where returns are closely linked to the underlying assets. To ensure that these products can continue to operate efficiently and in the best interests of their clients, we took the opportunity, on behalf of the industry, to commission an independent analysis of what occurred following the referendum and identify where and how it can evolve.

“We are pleased to see that both the industry and regulatory framework worked during the period and that fund managers acted appropriately and fairly to their investors. However, the industry recognises that areas such as communication and the valuation process can be improved.

“We are ready to not only embrace positive change, but also drive it. Our work has already started, and we look forward to working with the regulator, other industry associations and market participants across the board to ensure that we can be better prepared for future periods of uncertainty.”

John Forbes, Founder of John Forbes Consulting LLP, said:

“The regulatory and operating framework for retail investment in the UK in practice restricts retail investors to daily traded funds. Investors should have the choice to also invest in less liquid products, and those who choose to continue to invest in daily traded products need to be fully aware of the cost of liquidity, the risk that liquidity might not be available when they want it and the differences between funds. For investors to understand the products in which they are investing, communication by fund managers and financial advisers needs to be improved.

“There are many operational similarities between model portfolios for retail investors, unit linked insurance products and defined contribution pension schemes. These are an increasingly important pool of capital and it is vital that they continue to be able to invest indirectly in illiquid assets including real estate. The real estate industry, the investment product providers and the regulators need to work together to ensure that choice is widened rather than reduced.”

For more information please contact:

+44 (0)20 7269 4620


About The Association of Real Estate Funds (AREF):


  •               The Association of Real Estate Funds (AREF) is the voice of the real estate funds industry.
  •               Full members have a collective NAV of circa £65bn under management and the majority are benchmarked using the leading AREF/IPD UK Quarterly Property Fund Indices (QPFI).
  •               We are recognised by policy makers, regulators, tax authorities and other official organisations as the leading representative of real estate funds and therefore have the ability to influence the way our industry evolves.
  •               Investors and advisers are aware of the high standards our members adhere to, both in transparency and corporate governance, promoting confidence in investing in real estate through member funds.
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