Henderson Global Investors and Columbia Threadneedle have become the latest big fund managers to temporarily suspend trading in their UK real estate funds to prevent a run on redemptions due to Brexit.
Following similar actions by other big players half of the UK property fund sector for retail investors is now closed for trading.
Henderson announced on Wednesday that it was halting dealings in its £3.9 bn (€5.9 bn) Henderson UK Property PAIF and the associated feeder funds. In a statement, Henderson said, 'Despite a strong underlying portfolio, the decision was taken due to exceptional liquidity pressures on the funds, as a result of uncertainty following the EU Referendum and the recent suspension of other direct property funds.'
Around the same time Columbia Threadneedle confirmed it was taking a similar measure for its £1.4 bn UK property fund, 'to ensure the fair treatment of all our investors whether they are transacting now or investing for the longer-term.'
The fund manager added, 'Because the purchase and sale of property assets can be a lengthy process, our portfolio managers maintain a cash balance in the fund to meet requests from clients who wish to sell their shares.'
'We have not been immune to the recent trend of retail outflows from the sector and so far these requests have been met from the cash balance retained within the Threadneedle PAIF.'
Canada Life joins the lockdown
Similarly, Canada Life announced that four of its property vehicles, valued at £450 mln, have been closed for redemptions. 'Following last month's vote to leave the European Union, a combination of uncertainty around the pricing of commercial property assets and the recent rise in requests to withdraw from property funds, has meant Canada Life taking the decision to immediately defer requests for withdrawals. Deferring requests to withdraw allows us to protect the interests of all investors in the property fund, including those who plan to remain invested for the medium to long term.'
The trading suspensions come on top of the lockdown of funds, with a combined value of £9.4 bn (just under €11 bn), in recent days. Aviva Investors suspended its £1.8 bn UK property fund on Tuesday afternoon, followed shortly afterwards by an announcement from M&G Investments that it was suspending withdrawals from its £4.7 bn Property Portfolio. Standard Life was the first to act, closing its £2.9 bn open-ended real estate fund to redemptions on Monday.
Laith Khalaf, an analyst at Hargreaves Lansdown, was quoted in the Financial Times as saying that over half of the £25 bn Investment Association property sector was now closed to trading. 'Over half of the property fund sector is now on ice, and will remain so until managers raise enough cash to meet redemptions. To do that they need to sell properties, and as any homeowner knows, that is not a quick or painless procedure.
'Investors in commercial property funds should not make decisions in a panic. Granted the Brexit vote may have the potential to negatively affect the commercial property market in the short run, but long-term investors should be willing to ride out periods of weakness, particularly when there has been such a sharp decline in fund prices without much evidence of a slowdown in the underlying property market.'
