What is meant by “liquidity” in a property fund?
Liquidity simply refers to how easily your investment in a property fund (or any managed fund for that matter) can be turned into cash (or “redeemed”). Listed property funds have high liquidity as you are able to trade them on the stock exchange at any time. Whilst this is a positive it also comes with the increased volatility (ups and downs) that investing in the share market brings.
Unlisted property funds have low liquidity as the fund is not listed on a stock exchange. Liquidity is most commonly sourced through a sale of the property at the end of the investment term. Property fund investors will generally have their money locked into the investment for periods of around five years and sometimes more. Whilst this is a long-term commitment, the trade-off for the lack of liquidity is a reduced level of volatility along the way.