Property fund giants under pressure as Brexit hits sector


The £4.4bn M&G Property Portfolio fund has become the latest property fund to suspend trading as the Brexit vote is brought to bear on valuations for UK commercial property.

M&G follows the halt in trading in the £2.7bn Standard Life Investments UK Real Estate fund and the £1.9bn Aviva Investors Property Trust.

The announcements come as the new FCA boss Andrew Bailey warned the structure of open-ended property investment funds may need to be reconsidered. He said he was in “very close touch” with firms.

M&G, which manages the largest UK commercial property fund, said redemptions in the fund have “risen markedly” due to uncertainty created from the outcome of the European Union referendum.

Aviva said “extraordinary market circumstances” have led to “a lack of immediate liquidity” in the fund, while SLI said “the suspension was requested to protect the interests of all investors in the fund.”

SLI had already imposed a 5 per cent valuation adjustment on its property fund, amid post-Brexit uncertainty on property prices.

Last week Aberdeen Asset Management imposed a 3.75 per cent fair value adjustment on its £3.4bn UK Property Paif and feeder fund, and Henderson adding a 4 per cent adjustment to the £4bn UK Property fund.

Henderson, Columbia Threadneedle and Aberdeen told Mortgage Strategy‘s sister title Money Marketing they are not planning to stop trading in their funds. The former say they will “continue to monitor the conditions of the sector”, while Aberdeen says it has “no more plans beyond valuation changes”.

Tilney Bestinvest managing director Jason Hollands warns as other big property funds end up reaching between 10 and 15 per cent liquidity in their funds they might halt trading too.

The Standard Life fund had a cash position of just over 13 per cent, while Aviva’s fund had 9.3 per cent in cash at the end of May and M&G’s fund had 6.7 per cent at the end of June. Henderson’s fund had 14.3 per cent cash holdings at the end of May.

Meanwhile, Henderson’s UK Property Paif, Threadneedle’s UK Property fund and SLI’s UK Property Accumulation Feeder Trust were the top three most sold among 20 property funds from 1 June to 5 July, according to FE.