Jul
06

U.K. Property Fund Suspensions Send a Warning to the Junk Bond World

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Junk bond funds may pose a greater liquidity risk than those invested in U.K. commercial real estate.

Aerial Views Of The City Of London And The Canary Wharf Business & Financial DistrictPhotographer: Matthew Lloyd/Bloomberg

Investors in U.K. commercial real estate just touched a nerve.

In pulling their money out of property funds at such a rapid pace four asset managersfroze withdrawals this week, the investors showed how the cost of Brexit is spreading. They also tapped into one of the biggest fears of bond market observers: a mismatch between the liquidity of investment funds and their assets.

The real estate funds are designed to allow investors to withdraw their money on a daily basis, while the properties backing them could take months to sell. That’s similar to many mutual and exchange-traded funds that buy junk bonds — securities that can take weeks to sell — and offer daily redemptions…

U.K. Property Fund Suspensions Send a Warning to the Junk Bond World

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