Fund manager New Star has cut the value of its flagship UK property fund by 8.2%, taking the total reduction since July to 17.8%. The move, which reflects falling confidence in the UK real estate sector, follows the revelation last week that several open-ended funds have imposed redemption limits on investors as property values continue to fall.
Fund manager New Star has cut the value of its flagship UK property fund by 8.2%, taking the total reduction since July to 17.8%. The move, which reflects falling confidence in the UK real estate sector, follows the revelation last week that several open-ended funds have imposed redemption limits on investors as property values continue to fall.
The value of New Star UK Property Unit Trust has been reduced from £2.1 bn to £1.7 bn. New Star, which made the announcement on Monday, attributed the move to the 'adverse shift in sentiment towards the commercial property market' since July. This shift has had an impact on transaction volumes which, the company says, made the task of valuing commercial property more difficult. The fund's portfolio is heavily weighted towards prime office property in the City and the southeast of London with a vacancy rate of less than 1%.
'In recent days sentiment has deteriorated sharply, partly as a result of the publicity given to redemptions. This has stimulated further redemptions and heightened concerns about the liquidity of these funds,' said New Star.
The fund manager added that it has asked real estate agent CB Richard Ellis to value the portfolio fortnightly instead of monthly until the property market returns to a more stable state.
