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Am I misunderstanding this line: "So far, the numbers are small enough. Of the 35 billion pounds, or $45 billion, invested in these funds, just under £20 billi

Am I misunderstanding this line: "So far, the numbers are small enough. Of the 35 billion pounds, or $45 billion, invested in these funds, just under £20 billion has been affected." What? More than half? And that's considered insignificantly small?

aab0 10y ago
"These types of direct property funds — where the fund itself owns the building or property outright — represent a small piece of the mutual fund world. Yet they have accounted for a growing share of investment in commercial real estate in Britain in recent years. According to a recent Bank of England report, these funds have about $46 billion in assets under management, representing 7 percent of investment in the British market." http://www.nytimes.com/2016/07/07/business/dealbook/3-more-property-funds-halt-withdrawals-after-brexit-vote.html http://www.nytimes.com/2016/07/07/business/dealbook/3-more-p... the linked article. So it seems this is maybe 3 percent of the overall British mutual fund market, and a fairly exotic part.
- TheOtherHobbes 10y ago
  Where "exotic" = "high risk". These funds are far less liquid than most, because they're structured to offer a small amount of floating capital to cover normal withdrawals, and a much larger pool of highly illiquid capital trapped in high-value commercial properties which can take months or years to sell. So these are among the riskiest of all funds. They're a very niche interest for experienced investors. Historically they've offered much higher returns than the market average, but clearly that's over now. The situation isn't quite analogous to a bank run, because these funds are very peripheral and not structural. But a bank run isn't impossible. The UK desperately needs a renegotiated trade agreement with the EU to clarify the UK's position - and that's not going to happen any time soon. As one US investor said, no one in their right mind is going to go anywhere near the British economy until this is settled.
  - eru 10y ago
    Hmm, it seems like a closed (and perhaps exchanged traded) fund holding the same assets would be superior to this kind of property fund? If you want out, someone else has to take the property off you. Might as well do that via the exchanges, instead of letting some fund managers do it. Or what am I missing?
    - Ntrails 10y ago
      Superior in what sense? When you invest in a fund with liquidity constraints you get paid in higher returns (an "illiquidity premium"). This was known by investors going in. ETFs don't just magically make everything liquid without costs
      - eru 10y ago
        Exactly. The ETFs just make the liquidity issues public on the market. For the fund, you'd be paying some managers to buy and sell stuff whenever enough people/money leaves or enters the fund.
  - spoonie 10y ago
    They're a very niche interest for experienced investors. Experienced investors who are crowding for the doors based on the ups & downs of the market? Sounds pretty amateur to me.
foota 10y ago
It's possible that the first part is a typo and should be trillion?
- towlejunior 10y ago
  Total global wealth is $250 trillion. British mutual funds can't be one-fifth of it, no matter how well invested.
  - foota 10y ago
    Thanks for the reality check. aab0 seems to have the right of it, they cite a different article that goes into more detail about the funds in question http://www.nytimes.com/2016/07/07/business/dealbook/3-more-property-funds-halt-withdrawals-after-brexit-vote.html?ref=dealbook http://www.nytimes.com/2016/07/07/business/dealbook/3-more-p... edit: I'm still wrong, but it seems British mutual funds are an appreciable fraction of total global wealth (https://en.wikipedia.org/wiki/List_of_institutional_investors_in_the_United_Kingdom#Mutual_funds https://en.wikipedia.org/wiki/List_of_institutional_investor...) double ninja edit: that's not right. I don't really understand what the figures on that page are supposed to represent... anyone want to try clearing it up for me?
    - zhte415 10y ago
      I will clear it up for you: The numbers on that page are meaningless and misleading. Firstly, the AUM column in the table doesn't represent anything. It overstates their _global_ AUM by 2 to 20 times for the companies I checked. Secondly, this is by no means an exhaustive list of institutional investors in the UK. There are, well, I don't know but there are a huge number of small nameless investors sitting in the UK investing private funds globally, that are not and never will be on this list and whose assets will never be known, only estimated.
  - eru 10y ago
    Interesting. Where is that number from? I can imagine it comes with a ton of caveats. I don't think it's easy to put eg a value on towns or entire countries. (It's a shame we no longer see trades in sovereignty to observe prices from, eg like the Louisiana or Alaska purchase. But the wealth is still there.)
bravo22 10y ago
I think the article meant the overall numbers are insignificant, as opposed to it being insignificant as a percentage of the actual funds.
- Bud 10y ago
  That makes no sense. Tens of billions of pounds is significant by any standard. Has to be an error here.
  - whatok 10y ago
    It's relatively insignificant when compared against the rest of the mutual fund complex.

aab0 10y ago

"These types of direct property funds — where the fund itself owns the building or property outright — represent a small piece of the mutual fund world. Yet they have accounted for a growing share of investment in commercial real estate in Britain in recent years. According to a recent Bank of England report, these funds have about $46 billion in assets under management, representing 7 percent of investment in the British market." http://www.nytimes.com/2016/07/07/business/dealbook/3-more-property-funds-halt-withdrawals-after-brexit-vote.html http://www.nytimes.com/2016/07/07/business/dealbook/3-more-p... the linked article. So it seems this is maybe 3 percent of the overall British mutual fund market, and a fairly exotic part.

TheOtherHobbes 10y ago
Where "exotic" = "high risk". These funds are far less liquid than most, because they're structured to offer a small amount of floating capital to cover normal withdrawals, and a much larger pool of highly illiquid capital trapped in high-value commercial properties which can take months or years to sell. So these are among the riskiest of all funds. They're a very niche interest for experienced investors. Historically they've offered much higher returns than the market average, but clearly that's over now. The situation isn't quite analogous to a bank run, because these funds are very peripheral and not structural. But a bank run isn't impossible. The UK desperately needs a renegotiated trade agreement with the EU to clarify the UK's position - and that's not going to happen any time soon. As one US investor said, no one in their right mind is going to go anywhere near the British economy until this is settled.
- eru 10y ago
  Hmm, it seems like a closed (and perhaps exchanged traded) fund holding the same assets would be superior to this kind of property fund? If you want out, someone else has to take the property off you. Might as well do that via the exchanges, instead of letting some fund managers do it. Or what am I missing?
  - Ntrails 10y ago
    Superior in what sense? When you invest in a fund with liquidity constraints you get paid in higher returns (an "illiquidity premium"). This was known by investors going in. ETFs don't just magically make everything liquid without costs
    - eru 10y ago
      Exactly. The ETFs just make the liquidity issues public on the market. For the fund, you'd be paying some managers to buy and sell stuff whenever enough people/money leaves or enters the fund.
- spoonie 10y ago
  They're a very niche interest for experienced investors. Experienced investors who are crowding for the doors based on the ups & downs of the market? Sounds pretty amateur to me.

foota 10y ago

It's possible that the first part is a typo and should be trillion?

towlejunior 10y ago
Total global wealth is $250 trillion. British mutual funds can't be one-fifth of it, no matter how well invested.
- foota 10y ago
  Thanks for the reality check. aab0 seems to have the right of it, they cite a different article that goes into more detail about the funds in question http://www.nytimes.com/2016/07/07/business/dealbook/3-more-property-funds-halt-withdrawals-after-brexit-vote.html?ref=dealbook http://www.nytimes.com/2016/07/07/business/dealbook/3-more-p... edit: I'm still wrong, but it seems British mutual funds are an appreciable fraction of total global wealth (https://en.wikipedia.org/wiki/List_of_institutional_investors_in_the_United_Kingdom#Mutual_funds https://en.wikipedia.org/wiki/List_of_institutional_investor...) double ninja edit: that's not right. I don't really understand what the figures on that page are supposed to represent... anyone want to try clearing it up for me?
  - zhte415 10y ago
    I will clear it up for you: The numbers on that page are meaningless and misleading. Firstly, the AUM column in the table doesn't represent anything. It overstates their _global_ AUM by 2 to 20 times for the companies I checked. Secondly, this is by no means an exhaustive list of institutional investors in the UK. There are, well, I don't know but there are a huge number of small nameless investors sitting in the UK investing private funds globally, that are not and never will be on this list and whose assets will never be known, only estimated.
- eru 10y ago
  Interesting. Where is that number from? I can imagine it comes with a ton of caveats. I don't think it's easy to put eg a value on towns or entire countries. (It's a shame we no longer see trades in sovereignty to observe prices from, eg like the Louisiana or Alaska purchase. But the wealth is still there.)

bravo22 10y ago

I think the article meant the overall numbers are insignificant, as opposed to it being insignificant as a percentage of the actual funds.

Bud 10y ago
That makes no sense. Tens of billions of pounds is significant by any standard. Has to be an error here.
- whatok 10y ago
  It's relatively insignificant when compared against the rest of the mutual fund complex.