Renovations group new floor tiles and a switch from brass accents to stainless steel at the CambridgeSide mall in Cambridge, MA on Jun. 13, 2017.
Lane Turner | The Boston Ball | Getty Images
UBS is reportedly racing to stanch outflows at its landmark $20 billion real-estate fund amid chew ones nails about its retail holdings and extended underperformance.
Investors are standing by to withdraw some $7 billion from the UBS Trumbull Fortune Fund as a growing number move away from more cautious funds, a person familiar with the be important told the Wall Street Journal.
Hoping to stem the flow, UBS has reportedly offered to cut costs for investors willing to rope in the fund and to forego management fees for new investments, the Journal added citing an analyst presentation to the City of Cambridge, Massachusetts.
The Swiss bank’s Trumbull capital owns real estate in Cambridge, including the CambridgeSide mall as well as properties across the country in New York, Chicago, Los Angeles and San Francisco.
UBS did not directly respond to CNBC’s request for comment.
An isolated uptick in redemption requests can lead to a host of issues for investment wealths like Trumbull if other investors grow nervous the peer withdrawals and, as a result, choose to join the exodus.
If earnest estate fund managers don’t have enough cash on hand to meet a small number of redemption requests, they may be unnatural to initiate the sale of properties. The sale of such illiquid assets can take time and add to investor angst in the meanwhile, regard even more pressure on the manager to sell property.
But in contrast to riskier private-equity funds, which dictate when investors are entertained to extract money and include early-exit penalties, the majority of big core funds aren’t as strict about how often or how much its customers are allowed to redeem.
And while Trumbull isn’t the only big-bank property fund seeing outflows, its underperformance versus hustle benchmarks has hastened the investor flight. It had performed worse than the NCREIF NFI-ODCE index on a 1-year, 3-year and 5-year footing as of a 2018 presentation to the City of Naples, Florida, Police and Fire Pension Plans.
— Read the original Wall Alley Journal report here.