Henderson Global Investors’ UK Property PAIF and feeder fund, aimed at retail investors, have been closed to redemptions, which cited market uncertainty following the referendum result in the UK as the main reason for the move.
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Last week, Standard Life marked down the value of the buildings its funds own by 5 per cent. The UK’s two largest open-ended property funds, run by Henderson and M&G Investments, did the same.
“Dominoes are starting to fall” in Britain’s commercial property market, said Laith Khalaf, senior analyst at investment company Hargreaves Lansdown. Investors fled German property funds as well, forcing 12 to close for redemptions.
Prudential stressed that its multi-asset funds, including its PruFund range, would not be impacted by this and will trade as normal.
“The cash buffers built up by the managers have been eroded by investors heading for the door, both in the run-up to the European Union referendum, and in the aftermath”, he said.
M&G Investments, Aviva Investors and Standard Life Investments halted withdrawals because they don’t have enough cash to immediately repay investors.
Standard Life said it took this action in order to protect investors who wish to remain in the fund, who could otherwise be negatively affected by fund liquidations.
“The decision has been made to safeguard the interests of existing investors, and with agreement from the depositary and trustee of the Fund, Citibank Europe plc, UK Branch”, Aviva said in a statement.
In total there is now around £13bn of savers’ money now locked up in commercial property funds.
“To do that they need to sell properties, and as any homeowner knows, that is not a quick or painless procedure”.
The insurance company – now part of Power Financial Corp.as a subsidiary of Great-West Lifeco – says its United Kingdom property funds are valued at 500 million pounds.
But at times of market stress and uncertainty, demand from the number of investors looking to sell can be much higher than the cash buffer, which then results in trading being suspended.
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“It is certainly too early for formal complaints about this issue, however, we have begun to see initial enquiries come through from concerned consumers”, a spokeswoman said.
