63/66 Hatton Garden

Fifth Floor, Suite 23



United Kingdom

  • LinkedIn - White Circle
  • Twitter - White Circle
  • Facebook - White Circle

+44 (0) 203 633 6961

​Willow Oak Advisory is unable to provide any services to residents/citizens of the United States, Japan, South Korea, Cuba, Iran, North Korea, Libya, Somalia, Syria, Sudan, Myanmar, Yemen, or any other restricted country due sanctions or regulations imposed that may not be mentioned in this list. You must be at least 18 years old and legally eligible to participate in any offering from Willow Oak as well as any additional local laws of the country you reside in and any global bank sanctions. Willow Oak Advisory is not regulated by the Financial Conduct Authority. In accordance with the Financial Services and Markets Act 2000, Willow Oak Advisory does not provide any financial or investment advice. Willow Oak Advisory does not handle any deposits or client funds.


Are Property Funds Holding Too Much Cash?

Direct property funds are sitting on cash levels of up to 30%, but just one fund rebates fees if the buffer gets too big.

(Morningstar) Just one of the 16 UK Direct Property investment funds rebates fees to investors if its cash holdings get too high - that's despite some property funds hoarding up to 30% of their assets in cash.

A Morningstar investigation can reveal that investors are paying charges of up 1.63% to invest in property funds when up to a third of their money is sitting in cash, not generating a return.

BMO UK Property is the only fund in the sector which refunds investors some of their money when its cash pile reaches a certain level.

Ben Yearsley, investment director at Shore Financial Planning, says: “It’s a disgrace. These funds are offering something that they are not delivering. It is plain wrong to charge investors the full annual fee on a fund when only 70% of their money is being invested.”

Sitting on Cash

Elevated cash levels in a property fund are typically a sign that managers are bracing themselves for investors to sell out of the fund. Indeed, the property sector has seen a steady trickle of outflows since 2016.

While some might say the strategy is a sensible one, others say it is unfair to charge investors a fee for active fund management when their money is sitting in cash.

Morningstar contacted all of the funds in the Investment Association UK Direct Property fund sector and just one - BMO UK Property - said it has a policy to rebate investors some of their fees if its cash levels get too high.

The fund introduced a rebate policy in August 2018 which kicks in when the fund's cash level reach 15% of its assets. At this point, it reduces its annual management charge by 65 basis points on the cash above this amount.

In the 17 months since the rebate policy was introduced, it has been applied in all but two months - December 2018 and September 2019.

Guy Glover, manager of the BMO fund, concedes that cash levels are “significant” at their current level of 24% of the portfolio. However, he disagrees that a large cash allocation can hinder performance, pointing out that costs (including stamp duty and agency fees) are generally higher for direct property investments than, say, equities, and having cash can help reduce costs that would otherwise be passed on to investors.

Read Full Article Here