During the financial crisis of 2007 and 2008, real estate funds were forced to freeze operations after withdrawals surged, contributing to a property-market slump that saw values drop more than 40% from their peak in the UK.
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Britain’s commercial property market took a beating on Tuesday as a jump in demand by investors to take out money from one real estate fund led the manager to suspend withdrawals, driving a sell-off in a range of industry-related stocks.
Three more fund managers have stopped investors from leaving their United Kingdom property funds, trapping an additional £5.5 billion ($9.4 billion) and bringing to six the number of funds unable to meet withdrawal requests after the Brexit vote. These include Standard Life, Aviva, M&G Investments, Henderson Global Investors, Columbia Threadneedle, Canada Life and Aberdeen Asset Management.
Investors are anxious that a move to leave the European Union will send commercial property prices tumbling.
The Bank of England had already raised concerns about open-ended funds of this kind that permit investors to cash in their share of the associated assets when they take a long time to actually sell. Barratt Developments, Persimmon, Berkeley and Land Securities, who specialise in commercial property, have all seen their shares fall by around 4-7% in value over the last couple of weeks.
That followed similar moves by M&G, Aviva and Standard Life, who have all restricted access to their funds this week.
It said: “The property market itself may take some time to find its level, but we believe that the same factors that made property a good long-term investment yesterday remain true today”.
Henderson, Canada Life and Threadneedle became the latest on Wednesday to close their doors to traders looking to sell.
All are citing liquidity pressures due to issues over pricing of relevant assets and difficulties in actually selling properties in an uncertain financial climate.
“We will continue to monitor market events closely, using all available sources and our experience of the property market”, the spokesperson said. “Redemptions have now reached a point where M&G believes it can best protect the interests of the funds’ shareholders by seeking a temporary suspension in trading “.
Fund managers are trying to staunch a sharp flood of redemptions away from the funds.
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“To do that they need to sell properties, and as any homeowner knows, that is not a quick or painless procedure”.
