The problem of daily liquidity in open-ended property funds is like the proverbial square peg in a round hole. Fundamentally, an incompatibility exists between daily trading and the time lag required to sell physical real estate. It creates a liquidity mismatch and leads to competing interests between fund unitholders and their managers. It is a decade-old problem that remains unresolved — particularly in the UK fund market.

The competing interests during a market illiquidity event can be characterised as follows. On the one hand, some investors wish to redeem their capital immediately, fearing asset values are on the verge of collapse. On the other hand, some investors prefer to ride out the coming storm and not to fire-sell prime assets at distressed pricing. The latter view, usually shared by fund managers, preserves long-term investment performance, but fails to honour the liquidity an open-ended fund structure explicitly promises.

Typically, property-fund manage