Connect with us

Business

Phuket Business: When the financial gate slams shut

Published

 on 

PHUKET: Since I’m often writing about how I like alternative investment strategies, it may be a good idea to do a few pieces on the features of funds available to managers when they open.

This will help you understand what can happen when you invest in such a fund. This week is about gates – since most alternative funds write the option to put up a gate into their offer memorandums.

A gate is the ability to suspend redemptions if a certain percentage of the assets in a fund are redeemed at the same time. While this sounds like a bad thing, it can actually help save a fund and protect its remaining investors.

If a fund has illiquid assets and needs to dump them quickly, everyone loses. A gate is a way to prevent this from happening. Unfortunately, if you need to access proceeds from a sale and the fund puts up a gate, it might be some time before you get your cash.

If you’re looking at buying an alternative fund with illiquid assets, know that if there is a run a gate will likely be put up. I advise people to stay in funds where the underlying assets are exchange traded and can be liquidated quickly.

This way, a gate should never be a problem. However, some funds with illiquid underlying assets do provide extra diversification.

If you find yourself in a position where your fund has put a gate up, my personal opinion is to get your money back as soon as it becomes available again. Some would argue that if a gate is opened and lowered it means that the fund used it properly to protect the interests of remaining investors, and is therefore still a solid company.

I think that if there is a whiff of trouble with any investment you should get out as soon as possible. Whenever I’ve delayed acting on this instinct, my clients have suffered for it. Thus, I’m not going to delay getting out if a gate is lowered.

Many of the best fund managers in the world have lowering a gate as an option, so I don’t think it is good advice to avoid funds if you see they have it written into their offering
memorandum.

Just make sure you know what could happen in a moment of panic if the markets cause liquidity to drop and money to flow out of risk assets. This phenomenon might lead to a fund lowering its gates.

Make sure you know which fund assets would be easily disposed of and think of those holdings as likely to be true to the liquidity terms you read about on the fund fact sheet.

David Mayes MBA lives in Phuket and provides wealth management services to expatriates around the globe, specializing in UK pension transfers. He can be reached at 085-335-8573 or david.m@faramond.com.

— David Mayes

 

Get more from The Thaiger

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Thailand50 mins ago

World Cup to be shown in Thai prison | GMT

Crime17 hours ago

Angry woman sets fire to her boyfriend’s Pattaya room

Thailand18 hours ago

Explore Thailand’s least visited city in the South!

Pattaya18 hours ago

Newborn baby found in Pattaya trash can

Crime18 hours ago

Poll examines sexual violence causes, definitions

Drugs19 hours ago

Four members of drug gang arrested in Nakhon Si Thammarat

Join the conversation on the Thaiger Talk forums today!
North East19 hours ago

Military mum calls for justice over slain son

Tourism19 hours ago

Why aren’t tourists returning to Khao San Road?

Crime20 hours ago

A burglar, in a hole, in the roof, in the night

Drugs20 hours ago

Drug policy outlines by PM, cash rewards to police in busts

World Cup21 hours ago

World Cup to be shown in Thai prison

Economy21 hours ago

UK exports to Japan slump after ‘landmark’ free trade deal

Thailand23 hours ago

Try These Weird Thai Foods… If You Dare

World2 days ago

Thai gangs traffic Kenyans to Myanmar scam factories

South2 days ago

Deep South emergency decree extended 3 months

Thailand1 year ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand2 years ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism2 years ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket2 years ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism2 years ago

Phuket Thai food treats you need to try | VIDEO

Thailand2 years ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism2 years ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand2 years ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand2 years ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand2 years ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand2 years ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand2 years ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand2 years ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand2 years ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand2 years ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Trending