Money, money everywhere, and nary a deal in sight

The FT reports seemingly good news this morning. UK Institutional funds committed £3.2b to property in the last quarter of 2009. This dwarfs the peak of £1.7b collected at the height of the 2006 boom, says the Association of Real Estate Funds. Just under £3b of this was raised by unlisted funds, says AREF - seven times the £400m raised in the third quarter of 2009.

Remember "committed," not spent. As Friday's story in the Standard on Knight Frank's optimistic forecasts hinted, so many IFA's are ticking the property box on their client's investment choices that many funds are in danger of being drowned in cash. A man close to the Pru suggested last week that one fund has more than £4m a day pouring into the coffers.

On Saturday EG carried a very good article showing that one third of the 34 opportunity funds set up since 2007 had not bought a single property. No wonder, everyone is a vulture these days - and the pickings are being fought over hard. This means the more conventional funds face a real dilemma.

A pause in capital value inflation suggests the 2009 Q4 gold rush is over. But the public do not yet know this. The IFA's are still handing over client's cash faster than it can be spent. Do the funds, a) spend it fast and risk a bubble; b) hold on to the money and hope, or c) tell the truth and close funds to investors? Perhaps an AREF survey on what has been spent rather than "committed." will help staunch the flow.