Why on earth does anyone own open-ended property funds?

Many things in finance are complicated, says John Stepek. But whether or not to put your money in an open-ended property fund is not one of them.

Ah, liquidity. It sounds kind of complicated, doesn't it? The good news is that it's not. If an asset is liquid, it's easy to sell quickly without overly affecting the price. If an asset is illiquid, it's hard to sell quickly without overly affecting the price. Is an office block liquid or illiquid? Stupid question, isn't it? It's clearly illiquid. Takes a while to sell an office block, even if people are tearing down your door in the hunt for office space.

So, would it make any sense at all to get a load of people to chip in money to buy an office block, and then tell them that they could withdraw the value of their stake, in cash, any day of the week, with no notice? No, that'd be stupid. Who'd be stupid enough to do that? Take a wild guess...

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.