Open-ended funds need to withstand market corrections

Bill Hughes, the newly-installed chairman of the UK’s Association of Real Estate Funds and head of property at British insurer Legal & General, tells PERE this month that one of his focal points is examining the structure of open-ended vehicles following mass redemptions across Europe.

Bill Hughes, the recently-appointed chairman of the UK Association of Real Estate Funds (AREF), said the structure of open-ended pooled vehicles needed to be looked at following the scale of redemptions across Europe in recent months.

Speaking in the March issue of PERE magazine, Hughes said in some cases redemptions had destabilised funds so much that fire sales had been required.

“I don’t think property should consider itself as an isolated case in terms of having problems, but I do want to make sure that we have structures that can withstand future market corrections that also work well in an upwards market,” he told PERE.

Hughes, who is also head of property at UK insurance company Legal & General, went on to say that the structure of US open-ended funds held lessons for the UK.

While adding that closed-ended fund structures had proved more resilient, he also said there were issues with this type of real estate vehicle, including who should be in control of debt-decision making and to what extent investors should be involved in the decision making process. 

See the March issue ofPERE magazine for the full interview.