Indirect Funds in the UK usually refers to unlisted Collective Investment Schemes (“CIS”) that invest in either physical property/buildings or in shares in property companies or in units in property funds. Customers can make lump-sum investments which are pooled together and used to purchase a range of assets. Most CIS are unitised and in return for their investment customers receive units and so own a percentage of that CIS.
The CIS come in a variety of structures (e.g. off-shore and on-shore Property Unit Trusts (“PUTs”), Exempt Unit Trusts (“EUT”), Property Authorised Investment Funds (“PAIF”), Managed Pension Funds (“MPF”) or Insurance Wrapped Trustee Investment Plans (“TIPs”) etc). Some are restricted to or only suitable for certain types of Customer (e.g. Institutional or Retail Customers).
The CIS can be broken down into Open-ended funds which come with a variety of liquidity provisions such as daily liquidity, quarterly, semi-annual or Closed-ended funds where a Customer may only withdraw its money at the end of the fund’s life or during specific and infrequent liquidity windows. As property is an illiquid asset class most property CIS have an ability to defer or suspend redemptions, so Customers may face delays in their monies being paid out.
In the UK, Indirect Property covers a huge number of such CIS with a variety of strategies and performance objectives, many of which are members of the Association of Real Estate Funds (AREF).
