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McCarthy Taylor Ltd Issues Stark Warning To Investors

AUGUST 2013

McCarthy Taylor Ltd Issues Stark Warning To InvestorsIn Real Estate Investment Trusts (REITs)

 Paul Taylor CEO of wealth management IFAs McCarthy Taylor Ltd has issued a stark warning to investors in Real Estate Investment Trusts (REITs).

The planned relaxation of rules which currently restrict investments by one REIT in another, by giving REITs Institutional Investor status, is a serious threat to investors. While other industry commentators, such as the British Property Federation, are rushing to welcome the change, Taylor warns about the danger for investors. “REITs had seen significant gains, even before this announcement and we consider them a flexible way of gaining exposure to property, particularly the commercial sector. However, prices have already seemed to strengthen since the budget and we fear this reflects a market expectation of inter-trading between REITs. Whilst this might be a good opportunity in the short term - pushing up prices - the risk is that  long term investors will find they are in bubble and like the collapse of Split Cap Trusts a few years ago, we could suddenly see substantial losses being passed down the line between trusts. Investors may imagine they hold real property, as the under pin for their investment, just as was experienced with Split Caps, when in fact what was found in reality was a series of cross investments, artificially increasing prices which can collapse once the trade unwinds.

“We feel the Financial Conduct Authority (FCA), the new industry regulator, ought to be pointing this out to the Government. George Osborne needs to be warned by the FCA that this is not a prudent change in taxation and goes against the efforts being made to bring transparency to the market and restore investor confidence.”

McCarthy Taylor reports their analysis of gains in the REIT market was around 31% in the year to 30th April 2013, with average yields of around 3%. Taylor continues, “There are some real winners and like all investments, some real worries. It is worth researching carefully what managers hold in their trusts. Many have benefitted from being London centric, which has been rewarding whilst the London market has been inflated with foreign investment, but this may reflect an investment bubble. To suggest compounding this with inter trust investment adds significantly to risk, which is a shame as these should be relatively lower risk elements of a client’s portfolio.”

McCarthy Taylor urges the Treasury to re-think the proposal to avoid the risk to investors.

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Editor’s Notes:

  • McCarthy Taylor is a Chartered Financial Planning, Independent Financial Adviser and          Wealth Manager established in 1997
  • It is a leading provider of fee based advice and RDR compliant
  • All McCarthy Taylor advisers are trained to Diploma or Chartered level
  • McCarthy Taylor works with clients across the UK and abroad
  • The company advises both private individuals and business clients
  • The company became Chartered Financial Planners in February 2012; according to the CII   one of fewer than 400 firms to reach this accreditation
  • McCarthy Taylor has been awarded a ‘highly commended’ in the Moneyfacts Good Advice Awards 2012 Best Retirement Adviser category and rated among the top eight best tax and estate planners. They were also awarded the Incisive Media Gold Standard 2012 for Independent Financial Advice.

For further information about McCarthy Taylor, please visit www.mccarthytaylor.co.uk  or contact:

 Jane Herbert

Pilotmax T: 020 8334 0200

E: jane@pilotmax.co.uk