The Financial Conduct Authority (FCA) today reported its findings after billions of pounds of property fund investors' money was locked up last year.
Some of the UK's fund managers, including M&G, Aviva and Standard Life, were forced into suspending redemptions from funds after investors pulled their money in the wake of the Brexit vote.
The FCA concluded fund managers "did not adequately plan, or have clear policies and procedures, for valuing their property portfolios under stressed market conditions".
Also, some managers failed to consider how they could easily return cash back to investors.
Furthermore, funds could have communicated better to their customers, the FCA said.
Read more: Property fund crisis: one year on
Typically, investors can withdraw their investment from retail property funds within three days. But because property investments are more illiquid than stocks and shares, managers must hold sufficient cash buffers to meet such withdrawals.
In the wake of the 23 June referendum, fund managers struggled to keep up and were forced to freeze the funds while they realised property assets.
The FCA said suspensions "were effective in preventing market uncertainty from escalating further".
It highlighted there was a difference in the quality of the liquidity – i.e. the amount of cash held to meet customer withdrawals – between fund managers.
Cathy Pitt, a funds partner at law firm CMS, said: “Although FCA gives property funds a largely positive bill of health, improvements are clearly expected.
In particular, the FCA’s comments around communications and stress-testing valuations give a clue to regulator’s likely recommendations.