10 Nov 2023

AREF's CEO comments on recent media coverage of the commercial property market, fund closures and maximising the future of UK real estate investment

In the last few weeks, a few daily-traded open-ended property funds have announced a temporary suspension of trading or an intention to close altogether. At this point it is important to reflect on the broader sector and the offer they provide to the wealth management industry as part of a model portfolio allocation.

Daily-traded open-ended property funds provide direct exposure to the UK property market. The funds were established to offer intermediary investors a differentiated style of returns comprising stable income and capital growth opportunities, providing attractive diversification within a model portfolio and often offering lower volatility. These funds hold a level of cash to deliver daily liquidity and can deploy a limited range of tools to manage liquidity requirements. The daily-traded aspect is entirely linked to the requirements of the platform infrastructure used by the wealth management industry, as well as many Defined Contribution Pension (DC) offerings.

As in any funds sector, closure or merging of funds is a normal part of the cycle and often relates to performance and positioning of individual fund strategies. A number of daily-traded open-ended funds still remain, serving both wealth management and DC investors, and continue to deliver the differentiated returns and benefits of diversification to the investor base. The funds are usually ungeared, have low correlation to the equity market without the added risk exposure of leverage.

The Financial Conduct Authority continue to consider alternatives to the daily-traded model for intermediary investors to access UK property, however it is recognised that the platform infrastructure would need to develop to facilitate any potential change. No decision has yet been made and the funds continue to operate, providing attractive investment solutions to their clients. 

UK property open-ended funds have an important role to play in retaining investment within the UK economy and support the growth and regeneration of UK plc. With the changing nature of the UK pension fund landscape, the ability for DC schemes to access property assets through open-ended funds, both intermediary and institutional, to replace DB investment remains a primary focus for AREF.

Defined benefit (DB) schemes have traditionally been long-term funders of British real estate. But most are very mature and closed to new members, so are reducing in size. Furthermore, growing numbers are being transferred to insurance companies, who are generally holding more liquid investments – not unlisted real estate.

Defined contribution (DC) pension schemes are growing in popularity and size, and can benefit from exposure to alternative assets such as private equity and real estate. Currently they do not make as much investment in real estate as the DB funds which they are replacing, partly due to size, but mainly because most of the platforms through which they invest will only take daily-dealt products.

We detail the structural impediments to DC funds investing unlisted real estate, the real social and economic ramifications and our ideas for overcoming them in our submission to HM Treasury in advance of the Chancellor’s Autumn Statement. A summary and our full submission are available here.

Removing these impediments to DC investment in real estate will support the levelling up agenda, the UK’s net zero ambitions, and keep more UK buildings in the hands of UK-domiciled investors.



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Paul Richards

Paul Richards


Paul is the CEO of AREF.  Before joining AREF in 2020, Paul was Head of the European Real Estate Boutique within Mercer’s investment consulting business for almost 10 years, previously he was Head of Indirect Real Estate Investment and Global Managed Accounts at LaSalle Investment Management, where he was responsible for managing global portfolios of unlisted real estate funds for clients from Europe and Asia Pacific.

He has over 25 years of real estate experience in investment, corporate finance and research, and has advised investors, occupiers and venture capital companies on property portfolio strategy and on financial structuring, including PFI, senior and mezzanine debt and joint venture arrangements. His employers have included LaSalle Investment Management, Cushman & Wakefield and Henderson Investors.

Before coming into the world of real estate, Paul worked in marketing and market research. He originally studied Physiological Sciences at Lincoln College, Oxford and has a Master of Science in Real Estate from City University Business School, London, now Cass Business School.