A couple of retail investor commercial property funds have announced suspension of all dealings for an unspecified period. This is because, for obvious reasons, the professional surveyors they employ can’t offer confident valuations.
As only a small number of valuation firms cover nearly all the market, it follows that all property funds will follow this lead. If I owned a commercial property investment that was still permitting redemptions, I would sell out of it immediately. I would do that even if a full bid/offer spread would be applied – usually 5% to 8% or so.
Most of my subscribers will have noted my general pessimism about that asset class over quite a while, so hopefully aren’t heavily exposed to it, if at all.
It is worth noting that liquidity issues (ie no buyers!) can impact the corporate bond market in surprising ways, but governments and central banks are acutely aware of how serious a freezing of corporate debt markets would be and seem to be willing and able to keep pumping in liquidity as needed, generally by acting a ‘buyer of last resort’.
In the short term that should bring to a halt the sell off in the bond markets and even see bond prices rising.
When the crisis ends, bonds are likely going to be owned in large quantities by the authorities and when they hint at unwinding those purchases, it will be time to quickly exit the fixed income market. Something to make a mental note about!
Possibly in writing!
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