Financial advisers should receive better education over the illiquidity of property funds after a wave of fund suspensions in the wake of Brexit revealed varying levels of understanding, a trade body has said.
After conducting a series of interviews with advisers, The Association of Real Estate Funds (AREF) has warned IFAs have a "variable" understanding of the intricacies of open-ended real estate funds and said it would take steps to help improve their understanding.
In July, just three weeks after the EU referendum vote, Aberdeen and Canada Life joined Aviva Investors, Columbia Threadneedle, Henderson, M&G and Standard Life Investments in suspending trading on their property funds, amid a post-Brexit rush to exit the asset class.
One adviser told Professional Adviser the suspensions had "caught him off-guard" and said his firm would consider substituting their UK property funds for absolute return funds. By October all but one of commercial UK property funds had reopened for trading.
AREF said there was now an opportunity for product development for retail investors following the asset class's post-Brexit crisis.
The report comes after the Financial Conduct Authority (FCA) launched a discussion paper into open-ended property funds in February. The regulator said it was looking at whether more or different rules and guidance were needed to support market stability and protect consumers following the Brexit fund freezes.
AREF said it wants to work with the FCA on the regulation of the asset class following the possibility the sector was "tarnished" in the aftermath of the Brexit vote.
One of AREF's previous reports from 2012 recommended it take a greater role in the education of advisers on open-ended real estate funds but has admitted its progress had been "disappointing".
The trade body said it intends to increase communication with advisers in two subject areas: the operation and intricacies of open-ended property funds - particularly the circumstances in which trading may be deferred or suspended - and the education of advisers subject to a reduction of liquidity of the funds over the longer term.
'Can help iron out rough edges'
How do mergers affect investors?
Our video series continues
Three advisers have their say…
Regulator's data bulletin