The establishment and regulation of property funds : a critical and comparative analysis

Abstract

In the local context, the performance of the property market has, over the past 20 years, distinguished itself when compared to equities and other securities. However, the man in the street does not generally benefit from such steady growth, as immovable property is a very expensive asset, which only the "rich" can afford to hold as an investment rather than as a residence. This situation lead to the creation of property funds. Through property funds, investors pool their funds to invest in immovable property or property related assets and benefit from the returns associated with such investments. Had property funds not existed it would have been very hard for small investors to take position in such an asset class. At present the local regulatory regime does not yet cater for such type of collective investment schemes. It is however worth mentioning that Chapter 14 of Listing Rules - issued by the Listing Authority - includes a number of conditions applicable to Property Companies. This study attempts to critically analyse the different regulatory approaches adopted by various regulators in the regulation of property funds. The jurisdictions reviewed include: i. the UK Financial Services Authority; ii. the Irish Financial Services Regulatory Authority; iii. the Italian Commissione Nazionale per le Societa e la Borsa; iv. the Jersey Financial Services Commission; v. the Malaysian Securities Commission; and vi. the Monetary Authority of Singapore. This analysis will be used to assist the author in making recommendations as to the regulatory approach which best suits the local market. It will also provide an overview of the local property market and discuss in brief the potential social implications associated with allowing such funds to invest in Maltese property.