CMFAS M8 REITs & Property Funds question: LISTING a property vehicle

CMFAS M8REITs & Property Funds

Which statement BEST captures the effect that LISTING a property vehicle has on liquidity?

A Listing makes the physical buildings themselves quick and cheap to sell
B Listing removes all liquidity risk, including the risk of selling the buildings
C The buildings stay illiquid; listing moves liquidity to the traded units
D Listing forces the fund to price its units only once a quarter, like a direct fund

Show the answer and explanation

Answer: C. The buildings stay illiquid; listing moves liquidity to the traded units

The underlying real estate is illiquid in every case; listing simply moves the liquidity to the traded UNITS rather than to the buildings themselves, allowing units to be sold quickly at a market price.

Common mistake

Believing listing makes the physical property liquid or eliminates liquidity risk altogether.

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CMFAS M8 REITs & Property Funds question: LISTING a property vehicle

Answer: C. The buildings stay illiquid; listing moves liquidity to the traded units

Common mistake

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CMFAS M8 REITs & Property Funds question: LISTING a property vehicle

Answer: C. The buildings stay illiquid; listing moves liquidity to the traded units

Common mistake

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