Brandeaux has said that the regulator is partly to blame for the suspension of its fund range after the FCA moved to discourage advisers from marketing non-regulated Ucis funds, however advisers disagree the ban is to blame.
The firm suspended its eight specialist collective investment funds, including its £1bn Brandeaux Student Accommodation fund, following an increase in investor redemptions and problems with property market liquidity.
Charles Stanley Direct head of investment research Ben Yearsley says: “These are problems you have with investments such as commercial property in an open ended fund structure.
“This is no different to what happened four or five years ago when a lot of property funds were hit with six month delays and redemptions as the markets were crashing. It highlights the problems of illiquid investments.”
Yearsley adds it is unfair to blame the Ucis ban.
He says: “There was a similar problem a couple of years ago with the EEA Life Settlement fund when the FCA came out and did a similar thing and caused panic amongst investors who started withdrawing. This is an identical situation.”
In 2011 the EEA Life Settlements fund suspended dealings in the fund after receiving unprecedented levels of redemption requests from advisers and institutional investors after the FSA [FCA] labelled life settlement funds as ‘toxic’ products.
Yearsley adds: “These are identical scenarios but that aside it does highlight the problems of an illiquid investment in the an open ended fund structure.”
Hargreaves Lansdown senior investment manager Adrian Lowcock says: “The change in regulation may be the cause of the encashment.
“However the issues that Brandeaux is having are a result of the challenges of holding illiquid assets in an open-ended structure.”
Lowcock adds property investment is more suited to an investment trust format where investors can buy or sell shares on the stock exchange and while their actions may impact share prices it does not force the managers to sell assets.
Lowcock says: “Being forced to sell properties incurs costs and could result in getting a lower price than expected.
“The FCA’s regulatory change on the sale and marketing of Ucis to retail investors had been widely expected and managers of funds which were likely to be subjected to this should have had plans in place to ensure forced sales were unnecessary at least very unlikely.”