US fund manager BlackRock has reportedly deferred Q3 redemptions from its £3.5 bn BlackRock UK Property fund as it struggles to meet a surge in demand for redemptions against a backdrop of high inflation, economic uncertainty, and falling property values linked to higher interest rates.
The asset manager had previously announced it would limit redemptions for Q2 due at the end of September, and is now believed to be deferring withdrawals that were originally due to be paid at the end of December. The fund targets institutional investors and allows quarterly withdrawals only.
Similarly, British asset manager M&G is understood to be delaying redemptions from UK property funds managing around £8.1 bn of assets.
Top asset managers, including Columbia Threadneedle, Schroders and CBRE Investment Management, have all imposed restrictions on property fund redemptions since September, after money market turmoil and interest rate rises forced investors to reduce their exposure to the asset class.
However, Legal & General Investment Management said earlier this week that it had lifted the block on redemptions on its £3.7 bn Managed Property institutional fund.
High demand for redemptions has been driven by shifts in investment strategy in the pensions industry. Speaking to PropertyEU about sources of distress in 2023, Chris Brett, head of capital markets Europe at global advisor CBRE, said large investment managers may become distressed owners this year.
‘Many institutional investors (such as pension funds) over the past years have become overweight in terms of the real estate they hold versus cash or bonds. This in itself is creating a problem, because it is linked to capital redemptions. If the institution does not have the capital to match redemptions, it is forced to sell, possibly at a lower price,' Brett commented.
