Belfast Telegraph

UK Website Of The Year

More investment firms put commercial property funds into lockdown

Published 06/07/2016

Their suspension has fuelled investor jitters over the fallout from Brexit
Their suspension has fuelled investor jitters over the fallout from Brexit

Three more investment firms have put their commercial property funds into lockdown after seeing investors rush to pull out their money following the Brexit vote.

Henderson Global Investors, Canada Life, and Threadneedle became the latest groups to make the move, joining M&G Investments, Aviva and Standard Life Investments, which have all suspended trading in their UK commercial property funds since Monday.

Together the six funds are worth more than £14 billion.

Their suspension has fuelled investor jitters over the fallout from Brexit, sending the FTSE 100 Index tumbling by around 1.6%, and sparking hefty share falls among housebuilders.

Markets were also sharply lower across Europe and on Wall Street as the post-Brexit vote relief rally ground to an abrupt halt.

Henderson said it halted dealing in its £3.9 billion Henderson UK Property PAIF & Henderson UK Property PAIF Feeder Fund due to "exceptional" pressures on liquidity - meaning it did not have cash to repay investors, as funds are tied up in commercial properties.

Investors are now restricted from buying or selling shares in the funds.

It said: "The portfolio remains well positioned in core properties with high quality tenants, with the managers continuing to focus on delivering an attractive income stream."

Canada Life said it suspended dealing in four property funds totalling £450 million to "protect the interests of all investors in the property funds".

In a statement it said: " Following last month's vote to leave the European Union, a combination of uncertainty around the pricing of commercial property assets and the recent rise in requests to withdraw from property funds, has meant Canada Life taking the decision to immediately defer requests for withdrawals".

Canada Life said it would be deferring requests for withdrawals from its commercial property fund from 3pm on Tuesday, for up to six months.

Threadneedle's £1.4 billion UK Property fund has also been suspended.

Other firms are expected to follow suit as the investor exodus picks up.

Laith Khalaf, senior analyst at Hargreaves Lansdown said more than half of the property fund sector was "now on ice" and will remain that way until managers raise enough cash to meet redemptions.

"To do that they need to sell properties, and as any homeowner knows, that is not a quick or painless procedure."

He added: "These funds are therefore likely to be closed for weeks and months rather than simply a matter of days. Clearly there has been a knee-jerk reaction to Brexit in the commercial property sector, which may moderate over time."

But the Investment Association has sought to allay concerns, saying earlier this week that the ability to suspend trading "prevents fund managers from being forced to sell, in this case property interests, too rapidly and helps them achieve a better outcome for all their clients".

Read More

From Belfast Telegraph