Executive Summary
- The case concerns Home Long Income Fund (“the Fund”) suing Knight Frank LLP (“Knight Frank”) over alleged misvaluation of Fund properties.
- The Fund, managed by Alvarium Fund Managers (UK) Limited (“Alvarium”), claims Knight Frank’s valuations overstated property values, contributing to a 61% net asset value decline from Q2 2022 to Q2 2023.
- The Fund’s management has been under FCA investigation since February 2024, with Alvarium’s role terminated and replacement delayed until June 2025.
- The Fund’s investors (Investor Group) initiated claims against Knight Frank, including negligence, procuring breach of contract, and unlawful means conspiracy.
- Knight Frank seeks to strike out the claim, arguing the Fund was not in a position to properly formulate claims when proceedings began and that serious allegations lack evidential basis.
Sanctions Highlights
- No direct sanctions against parties are noted.
- However, FCA restrictions on the Fund since April 2024 reflect regulatory sanctions impacting Fund operations.
- The Fund’s governance issues and FCA intervention may trigger secondary regulatory or compliance sanctions affecting related entities.
Emerging Risks
- Prolonged management vacuum at the Fund due to delayed ACD replacement risks further mismanagement and investor losses.
- Allegations of overvaluation and mismanagement may expose Knight Frank and Alvarium to reputational and legal risks.
- Potential claims of unlawful means conspiracy and procuring breach of contract, though currently speculative, could escalate litigation complexity.
- Investor activism and regulatory scrutiny increase operational and compliance risks for Fund managers and service providers.
Geopolitical Impact
- The case is situated within the UK legal and regulatory framework, highlighting the UK’s robust financial regulatory environment.
- FCA’s active role underscores UK’s commitment to investor protection and market integrity.
- The litigation may influence international investor confidence in UK-regulated open-ended investment companies (OEICs).
- Knight Frank’s global presence (50+ territories) means reputational fallout could have cross-border implications.
Economic Intelligence
- The Fund’s net asset value decline of 61% and gross property value drop of 60% over one year indicate significant asset devaluation.
- The valuation dispute could affect investor returns and market valuations of similar real estate funds.
- Delays in Fund management transition may impact liquidity and investor confidence.
- The case exemplifies risks in property valuation accuracy and its economic consequences for investment funds.
Strategic Recommendations
- Monitor FCA regulatory developments and any further sanctions or restrictions on the Fund and Alvarium.
- Assess Knight Frank’s exposure to liability and reputational damage, especially given global operations.
- Advise investors and stakeholders to seek transparency on Fund management and valuation methodologies.
- Prepare for potential protracted litigation and consider alternative dispute resolution to mitigate costs.
- Review governance structures of OEICs to prevent similar management and valuation disputes.
- Track investor group actions as indicators of broader market sentiment and potential contagion risks.
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**Source Notes:**
Case Title: Sanctions Intelligence Digest
Link: https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1345.html