Investors and fund managers could benefit from more transparent conversations around fund termination decisions and a much earlier start to their discussions on the subject, according to Lonneke Löwik, director research and information at the European association of investors in non-listed real estate funds (INREV).

Löwik made the comments following the publication of INREV's latest study on fund terminations which revealed a continued trend from last year toward delaying decisions about termination. The study found that two thirds of non-listed real estate funds scheduled to terminate between 2011 and 2013 will be extended. Some investors felt this was being driven by fund managers' deliberate attempts to make the decision to extend a fund the only viable option. A number of investors felt that the decision to extend a fund was motivated more by fund managers' desire to maintain fee income than by what may be in the best interests of the investors.

As a result, investors want to engage with fund managers much earlier over their fund termination strategies. Fund managers, on the other hand, cited the need to allow time to consider all the termination options as the main reason for delaying a decision, with 56% of funds due to terminate between 2011 and 2013 falling into this category.

'This is an interesting revelation,' Löwik noted. 'It suggests that, while not a universal theme, there is a level of disconnect between investors and fund managers, with some investors feeling cornered.'

A majority of the funds opting to continue beyond their original termination date were aiming at extensions of between one and three years. But 32% of funds surveyed said they would seek to liquidate. Of the funds that decided to terminate, the majority were disinclined to dispose of assets. Both investors and fund managers expressed the desire to keep hold of high quality assets, because of the uncertainty over current market conditions.

However, a number of investors were keen to explore the option of retaining their assets outside the framework of a fund, for example, through joint ventures, club deals or direct ownership, denoting an interesting shift in approach.