Am I misunderstanding this line:
"So far, the numbers are small enough. Of the 35 billion pounds, or $45 billion, invested in these funds, just under £20 billion has been affected."
What? More than half? And that's considered insignificantly small?
"So far, the numbers are small enough. Of the 35 billion pounds, or $45 billion, invested in these funds, just under £20 billion has been affected."
What? More than half? And that's considered insignificantly small?
Yet they have accounted for a growing share of investment in commercial real estate in Britain in recent years. According to a recent Bank of England report, these funds have about $46 billion in assets under management, representing 7 percent of investment in the British market." http://www.nytimes.com/2016/07/07/business/dealbook/3-more-p... the linked article.
So it seems this is maybe 3 percent of the overall British mutual fund market, and a fairly exotic part.
These funds are far less liquid than most, because they're structured to offer a small amount of floating capital to cover normal withdrawals, and a much larger pool of highly illiquid capital trapped in high-value commercial properties which can take months or years to sell.
So these are among the riskiest of all funds.
They're a very niche interest for experienced investors. Historically they've offered much higher returns than the market average, but clearly that's over now.
The situation isn't quite analogous to a bank run, because these funds are very peripheral and not structural.
But a bank run isn't impossible. The UK desperately needs a renegotiated trade agreement with the EU to clarify the UK's position - and that's not going to happen any time soon.
As one US investor said, no one in their right mind is going to go anywhere near the British economy until this is settled.
They're a very niche interest for experienced investors.
If you want out, someone else has to take the property off you. Might as well do that via the exchanges, instead of letting some fund managers do it.
Or what am I missing?
ETFs don't just magically make everything liquid without costs
edit: I'm still wrong, but it seems British mutual funds are an appreciable fraction of total global wealth (https://en.wikipedia.org/wiki/List_of_institutional_investor...)
double ninja edit: that's not right. I don't really understand what the figures on that page are supposed to represent... anyone want to try clearing it up for me?
Firstly, the AUM column in the table doesn't represent anything. It overstates their _global_ AUM by 2 to 20 times for the companies I checked.
Secondly, this is by no means an exhaustive list of institutional investors in the UK. There are, well, I don't know but there are a huge number of small nameless investors sitting in the UK investing private funds globally, that are not and never will be on this list and whose assets will never be known, only estimated.
I can imagine it comes with a ton of caveats. I don't think it's easy to put eg a value on towns or entire countries.
(It's a shame we no longer see trades in sovereignty to observe prices from, eg like the Louisiana or Alaska purchase. But the wealth is still there.)