UK - Property investment funds are unlikely to lure schemes away from traditional vehicles, Mercer Investment Consulting claims.
Mercer – responding to the government’s consultation document on how PIFs should be introduced – believes it will be too costly for schemes to convert their property investments into PIFs.
Mercer senior investment consultant Greg Wright said: “We can see PIFs appealing to the retail investor for whom the choice of liquid, cost-effective balanced commercial property investment vehicles has been limited.
“But many schemes gain their commercial property exposure through other types of pooled vehicles, and it is far from certain that it will be cost-effective to convert PUTs to PIFs. As a result, while funds putting new money into property will probably want to look at PIFs, it is possible that the bulk of existing investments may stay in PUTs.”
Investment Management Association regulation and taxation director Julie Patterson welcomed the introduction of PIFs – known as Real Estate Investment Trusts in other countries – but added that the government must go further to make them attractive to investors.
She said: “One simple change to the Collective Investment Scheme tax regime, which would remove tax leakage at vehicle level, would be the catalyst for change in the property investment market that the government so desires.”
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