Growing Unease as British Mutual Funds Block the Exit Doors

[inanna]

Source: New York Times

JULY 7, 2016

As one British mutual fund after another bars its doors to fleeing investors, traders and regulators alike are asking the same question: What does it mean for nervous global markets?

This week, six asset management firms in Britain decided to refuse, for the moment, cash demands from those seeking to escape funds that invest in commercial real estate in the country. The rush for the exits followed the unexpected decision by British voters to leave the European Union.

<snip>

Yet to see, in real time, fund companies turning away investors because they cannot quickly unload assets that are hard to sell brings to life a nightmare situation that has long kept central bankers and large investment managers awake at night.

“The market has gotten crowded,” said Ken Monaghan, an investor in high-yield bonds for Amundi Smith Breeden, a global investment company that manages $1 trillion. “At some point you have to wonder what happens if all these investors decide to go home.”

Read more: http://www.nytimes.com/2016/07/08/business/dealbook/growing-unease-as-british-mutual-funds-block-the-exit-doors.html

[Kelvin Mace]

1. Another real estate bubble looks like it's popping

Apparently no one learned any lessons from the Great Recession.

[woundedkarma]

2. another month or two?

And it'll be time to buy, right?

[Kelvin Mace]

3. Also, WHAT?

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.

Check my math, but £20 billion of £35 billion is not a "small" number, it is 71%!!

[dixiegrrrrl]

4. Who you gonna believe? Them, or your lying eyes?

Essentially what has happened since 2008 is that money as value has become nothing more than binary figures on a screen.
All these people who are SO SO rich, from funds, forget that funds are made up of IOU's, of one sort or the other.
It's been debt as money for the last 30 years. And there IS a place and a time when the people who owe the debt stop paying.
And been kept pretty much a secret to those who don't read money news.

Here's the real question:

I'm an investment bank.
I know Brexit is an issue for the last year, and I know the election/decision is going to be made at some date in a few months.
But I don't figure out which decision will impact which funds in my company, and prepare for it ????

Apparently most of them did not.

Interestingly, George Soros did, and shorted certain markets about a week before the vote.

[Kelvin Mace]

5. Seems the real estate bubble of 2008 has returned

With a vengeance.

[dixiegrrrrl]

6. In 2008, one of the country's largest mutual fund said it was considering closing funds

and worse yet, that it would "break the dollar" pledge of not letting fund value drop below 1.00.
That was and is unprecedented.
Which was the same as saying "shit's gonna hit and we will do this and more if it and when it hits".

took out my retirement account the next day.

[CreekDog]

7. the Brexit vote is likely fueling this

it was a disastrous vote for the UK economy and for the interests of Scotland and Ireland (Northern Ireland and Republic of Ireland).

[Kelvin Mace]

8. Agreed, but the real estate markets were going crazy

And Brexit is the needle to the bubble.