REGULATION WATCH- FRA to require periodical appraisals for real estate funds under Capital Markets Act: The Financial Regulatory Authority (FRA) has finalized potential changes to how real estate funds are regulated by the Capital Markets Act that would require fund managers to periodically appraise their portfolios, according to a statement (pdf). The amendments would, if enacted, mandate at least one FRA-licensed consultant per fund to appraise portfolios on a quarterly basis if listed or every six months at a minimum if privately held. The changes would also scrap a 2014 decision requiring 70% of the assets held by funds have regular returns, as well as introduce precautions to avoid conflicts of interest among shareholders.

Background: Real estate funds invest up to 80% of their proceeds in easy-to-value, specific real estate properties — whether directly or via buying shares in listed or private firms. The remaining 20% are typically invested in more liquid bonds or other instruments. They gain their appeal from price appreciation and so provide long-term income. The funds may also list on exchanges and make public offerings to grow their size. The FRA (called the Egyptian Financial Supervisory Authority at the time) amended the Capital Markets Act in 2014 to allow for the establishment of sector-specific mutual funds, one of which is the real-estate focused fund. As far as we know, the Egyptians Real Estate Fund is the country’s first, and is due to be up and running this month.