Fund management firms exacerbated the commercial property disaster last year by spending £20m in promoting these vehicles to retail investors, Heartwood Wealth Management says.
The firm's analysis of advertising data in 2007 found investment houses continued to promote commercial property funds while sector outflows in Q4 hit £1.65bn.
Heartwood chief executive David Lough says many investors had "their fingers burnt" by the commercial property market and fund houses have to accept added responsibility.
"Certain retail fund management firms have contributed to the problem by advertising funds which, in the conditions developing during 2007, had very little hope of achieving a respectable performance,” he says.
“Now some (investors) are locked in because the funds cannot be sold.”
Heartwood has also launched a stinging attack on the IPD index, which it says led investors to buy commercial property funds at an inappropriate time. It believes the IPD UK All Property Monthly TR index is slower to react to developing trends than market indices such as the FTSE 100.
According to Heartwood statistics, the IPD UK All Property Monthly TR index increased 4.59% in the first eight months of last year, while the FTSE All-Share real estate index fell 19.06% in the same period.
Over the full year 2007, the IPD index fell just 5.48% and the FTSE index closed down 36.6%.
“It’s disappointing that investor information on the sector is still so tied to the IPD index, which has been exposed by recent events to be flawed,” Lough says.
“We believe that the commercial property sector would benefit from adopting a more market-based yardstick to avoid the type of information lag that has affected so many retail investors.”
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