Asset managers close the gate on £15bn-£20bn funds
Post-referendum reverberated through the City yesterday as several more property funds were forced to shut the gate on their investors, while the value of the pound languished below $1.30.
Six companies’ funds, with an estimated value of £15bn to £20bn, have been frozen this week as fears over the consequences of the UK’s vote to leave the EU prompt a rush to withdraw cash from open-ended commercial property funds. Other vulnerable sectors are expected to follow.
World-renowned investment veteran Mohamed El-Erian told City PM: “There are several potential channels for contagion, starting from within the sector and spreading out depending on the severity of the shock.”
El-Erian, the former Pimco boss who is now chief economic adviser to Allianz, added: “The suspensions imposed by [these] fund managers are likely to accelerate outflows from other similar funds, potentially also pushing them to impose limits on investor redemptions. With that, the sector as a whole can become contaminated.”
Read more: Property companies' share prices knocked again as Brexit hangover clings on
Fund managers could be forced to shed liquid holdings as a result, he added.
The pound sank below $1.28 during trading yesterday for the first time since 1985, as bearish sentiment spread. Other fund managers with property funds have insisted that they can ride the storm.
“We believe the Kames Property Income Fund is relatively well positioned to weather the present turbulent conditions,” said a spokesperson for that fund.
A Legal & General representative added: “Our property fund remains open, and we have liquidity to enable customers to buy into or leave the fund.”
Yesterday, Columbia Threadneedle suspended trading on both the Threadneedle UK Property Authorised Investment Fund (Threadneedle PAIF) and the Threadneedle UK Property Authorised Trust.
Henderson Global Investors also suspended trading in its commercial property funds. Canada Life said it had suspended its Canlife Property and Canlife UK property funds.
The trio follow Aviva, M&G and Standard Life Investments in suspending trading on UK property funds.
Aberdeen Asset Management said last night that some withdrawals from its £3.2bn UK Property Fund would be hit by a 17 per cent dilution levy, and that some late orders would not be fulfilled, according to Reuters.
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