Smaller institutional investors are unable to invest in the UK residential market, which remains almost as impenetrable to the small or private investor as it was a decade ago, according to new research from investment manager Seven Dials Financial Funds. A smaller investor is one investing £2m or less.

Mickola Wilson, director at Seven Dials Financial said: “Much has been made of growing institutional investment into UK residential, but by effectively barring the smaller investor from being able to allocate their funds efficiently, the asset class risks losing out on significant amounts of capital that will be seeking a safe haven against the backdrop of the economic crisis caused by the pandemic.

“Our findings show that aside from investing directly into buy-to-let, REITs remain the best bet, though the limited number of UK residential focussed REITs and the fact that these vehicles are vulnerable to stock market fluctuations means that for many smaller investors these may not prove suitable vehicles.

“There are a number of new investment vehicles in the pipeline that may allow a greater amount of smaller institutional investors to enter the market, and we look forward to seeing these emerge as UK residential is a strong asset class that will prove attractive to a variety of investors.

“There should now be concerted efforts to open this asset class up to a wider array of institutional investors, especially as today’s market conditions mean many managers will be looking to allocate their funds into safe havens.”