Property  

Firm blames FCA’s blanket Ucis view for fund closure

The Mansion Student Accommodation fund has blamed redemption demands from investors for its suspension but expert says the Financial Conduct Authority’s conservative view on unregulated collective investment schemes could lead to their extinction.

An announcement on the Channel Island Stock Exchange says that processing of subscriptions and redemptions of shares for the fund has been suspended, and this has been backdated to start from 1 October 2013.

All of the fund’s five share classes - in sterling, US dollar, Singapore dollar, Swiss franc and the euro - have been closed to both redemptions from existing investors and purchases from new investors. The fund was launched in January 2010.

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Graham Basham, director, said in the update that the suspension is due to “continuing net redemptions” which had the effect of causing the cash reserves more quickly than they can be replenished.

In July of this year MSAF had available around 10 per cent of its net asset value in cash or near cash but over the past two months this figure has fallen due to increasing redemptions.

Mr Basham said in a statement: “The MSAF cells are therefore unable to meet the current redemptions without the immediate sale of an asset or assets, or a refinancing.”

He added that to protect the “fair value” of the assets, the board of the fund has suspended dealing while liquidity can be improved and the board will continue to pursue its refinancing options in order to raise liquidity.

In July, student property investment specialist Brandeaux suspended its fund range from trading due to liquidity concerns, leaving investors stuck in the funds and unable to redeem their investments.

The company blamed the suspension on the FCA’s recent ban on the sale and marketing of unregulated collective investment schemes to retail investors.

James Dingwall, director at compliance firm Thistle Initiatives, told FTAdviser that the Mansion Student Accommodation fund was generally seen as a good investment and has performed well over the years.

He said: “Unlike some of the other Ucis investments, it has assets, a good income stream and a potential for capital growth.

“It should therefore be questioned whether the FCA’s view on Ucis has actually helped or hindered its objective of consumer protection where Ucis is concerned.

“We understand that due to the [Financial Services Authority’s and the] FCA’s concerns over Ucis, IFAs who have advised their clients to invest in such funds have taken the decision to disinvest their holdings - unfortunately all at once - and this has caused a run on a number of Ucis and created the kind of problem Mansion is now facing.

“It is vitally important that the Ucis market is not driven to extinction by the regulator but it would appear that this is the route which is sadly on the horizon.”

Mr Dingwall added that a “good proportion” of the £282m has been raised by UK based financial advisers who recommended this fund to their clients, many of which are retail.