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Fund groups review cash disclosure stance on property

Fund groups are reviewing their cash disclosure policies for property fund factsheets after concerns were raised about their transparency.

Three funds in the IMA Property sector – the Scottish Widows HIFML UK Property fund, the £625m Threadneedle UK Property fund and the £101.7m F&C UK Property fund – do not disclose cash holdings.

The Threadneedle property fund holds 25 per cent of its portfolio in cash, while F&C holds 30 per cent and Scottish Widows 8 per cent.

Threadneedle’s bond and equity funds report their levels of cash alongside other assets on their factsheets as a matter of course, as does F&C.

Scottish Widows, however, does not detail the cash holdings of several equity and bond funds.

Chelsea Financial Services research director Juliet Schooling Latter says property funds should disclose any cash holdings.

She says: “It’s important to know how much cash is in them; people need to be aware of that. The levels of cash they hold should be detailed on their factsheets. 

“It’s not really down to what you’re required to do. It should be something that most companies aspire to do – give a level of transparency to investors.”

Schooling Latter says it is difficult to judge the right levels of cash in open-ended direct property funds because of the large drag the asset has on performance and the need to keep the fund liquid.

Property funds can also build up a large cash holding because of the size of property transactions and the time it takes to complete a purchase, she says.

Murphy Wealth partner Adrian Murphy says it is a concern that some funds are not setting out their cash holdings in factsheets.

He says: “Why wouldn’t you disclose it? Without that information you cannot know how liquid the fund is.

“In the interests of transparency they should disclose it and it is something the FCA should make compulsory. How are you supposed to assess suitability if you don’t know what’s in a fund?”

The FCA declined to comment.

A Scottish Widows spokesman says the firm will disclose cash in its property funds in future.

He says: “This is not a policy of not disclosing cash levels. Rather, it has been a feature of the data we’ve received from the fund manager. 

“We realise, however, this is an important element and are looking to disclose the cash element going forward.”

F&C Investments head of UK sales Rob Thorpe says the fund’s cash level is solely for liquidity purposes and for pending transactions.

He says: “We are looking at ways in which it can be made clear to investors what percentage of the fund’s cash holding is pending property acquisitions and what percentage is a strategic portfolio position.”

Thorpe adds that currently much of the fund’s cash is allocated to a number of deals that should be finalised soon.

A Threadneedle spokeswoman says the fund discloses its cash level twice each year in its reports and accounts. “We regularly review our client communications to ensure we provide the most relevant details for investors,” she adds.

Chelsea Financial Services first highlighted the poor standard of many fund factsheets last year. Schooling Latter blasted the industry, saying: “A worrying number of fund factsheets are sometimes three to six months out of date. Some have the wrong fund manager, wrong assets under management and goodness knows what else.

“This is simply not good enough and the problem needs to be addressed.”



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