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Half of IFAs accept need to suspend property fund withdrawals, says Reita survey

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Despite a very mixed industry and media reaction, 50 per cent of IFAs believe the recent move by some providers to suspend withdrawals from property funds is ‘a sensible measure to safegua

Despite a very mixed industry and media reaction, 50 per cent of IFAs believe the recent move by some providers to suspend withdrawals from property funds is ‘a sensible measure to safeguard the interests of investors’, according to a survey commissioned by Reita, the educational and awareness campaign for real estate investment trusts and quoted property investment.

Last month Axa became the latest investment firm to halt withdrawals from its property funds, putting a six-month delay on requests from investors on its property life and pension funds, following similar announcements from Friends Provident, M&G, Close Investments, Aegon Scottish Equitable and Scottish Widows.

The Reita survey, which was conducted by NMG Research last months and involved 212 UK-based financial advisers, also found that fewer than one in five IFAs believe they currently have the qualifications needed to advise on investments under the UK’s new retail distribution proposals, while 56 per cent of respondents say they will be taking additional higher level investment qualifications in preparation for the implementation of the new rules.

The survey question revealed that 32 per cent of IFAs did not feel qualified to comment on the current levels of discount to net asset value which some Reits and property investment trusts are now experiencing.

Of those advisers confident about commenting on NAV discounts, the largest group (38 per cent) believe the discounts to NAV in the price of Reits represent a ‘potentially attractive investment opportunity’.

UK property stocks, which are mainly Reits, are currently trading at an average discount to net asset value of about 20 per cent. The discount has narrowed from around 35 per cent in mid-November, partly as a result of falling NAVs, but also thanks to a moderate price rally. UK property shares are up 17 per cent since January 9, compared with a decline of 2 per cent for the FTSE All Share Index.

‘Against the background of continuing market and economic instability, the findings of our latest quarterly research report are very encouraging, clearly demonstrating that the majority of IFAs remain confident of the long-term benefits of UK property investment,’ says Reita head of external affairs Dave Butler.

‘The appetite for further education and qualifications is also very welcome, showing the real commitment advisers have to further their experience and ensure they are well equipped for future regulatory change.

‘We are currently working with the Chartered Insurance Institute on the extension of the diploma level investment paper to include property investment as an asset class, so it’s very reassuring to see that more than half of IFAs are already keen to extend their skills.’

Despite continued property market volatility, more than half (53 per cent) of IFAs say they are recommending clients to keep investment levels constant. However, only 6 per cent of IFAs are advising clients to increase their exposure to property, while the remaining 41 per cent believe clients should reduce their property exposure.

By comparison with earlier Reita research, the survey found a significant change in IFAs’ views on reasons to consider property investment. The vast majority of advisers now say diversification from bonds and equities is the major reason to encourage clients to invest in property, while fewer than 10 per cent cite factors such as capital growth and regular income.

Over the past year, Reita has continued to grow its membership which now includes 12 of the biggest Reits and quoted property companies, 10 fund managers, the London Stock Exchange, 11 investment banks and advisers, law firm DLA Piper, the British Property Federation and the Investment Property Forum.

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