GLOBAL - Some investors are unhappy with fund managers' decision to postpone the termination date of non-listed real estate funds, according to a latest survey by the European Association of Investors in Non-listed Real Estate Vehicles (INREV).

INREV's Termination Study has found that fund managers are planning to postpone the termination of date of nearly two-thirds of non-listed real estate funds originally scheduled to close between 2011 and 2013. 

Lonneke Löwik, director of research and information, said: "This is an interesting revelation. It suggests that, while not a universal theme, there is a level of disconnect between investors and fund managers, with some investors feeling cornered."

She recommends investors and fund managers begin "transparent conversations" around fund termination decisions early to narrow the perception gap.

Changing termination strategy is not new, however. Nearly 60% of fund managers have changed their termination date at least once between 2009 and 2011, according to the survey.

However, during that period, the most frequent strategy was from "extension to liquidation", reflecting "the peaks and troughs of different markets", rather than the other way around, INREV said.

Fund managers said they were adopting the 'wait-and-see' attitude because they needed more time to think through all the options, it added.

However, investors, according to the survey, believe fund managers have fee income, rather than investor interest, in their minds.

Investment in a closed-end fund does not necessarily mean investors can predict exactly when the funds will terminate and when the capital will be returned, Löwik said.

"This trend demonstrates how investors and fund managers inject a powerful dose of pragmatism when it comes to deciding the ultimate termination strategy for their funds, despite the guiding principles laid down in the fund documentation at the outset," she said.

The survey showed that a majority of the funds choosing to continue beyond their original termination date were looking to extend between one and three years. 

Most of the 32 of the funds planning to liquidate still want to keep their money in high-quality assets due to uncertain market conditions.

They are interested in exploring 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", INREV said.

It added that, overall, market conditions and an uncertain economic outlook in particular were the key reason most funds changed their termination strategies, though fund-specific factors and investor preferences were also important.