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Domino effect hits UK property market as more funds suspend trading

Domino effect hits UK property market as more funds suspend trading

Henderson, Columbia Threadneedle and Canada Life have become the latest asset managers to suspend dealing on UK property funds following a spate of closures this week.

Around £14.8 billion in investor capital is now held in shuttered property funds, following suspensions by Henderson, Standard Life Investments, Columbia Threadneedle, M&G, Canada Life and Aviva Investors.

This accounts to almost 60% of the £25 billion in UK commercial property investment reportedly held within fund structures, according to calculations by Modern Investor's sister publication Citywire Wealth Manager

Canada Life has become the latest firm to give into pressures following the Brexit vote and has suspended its property funds.

The funds, which are around £500 million in value, are the Canada Life Property Pension fund, the Property Life fund, UK Property Life fund and the UK Property Pension fund. 

Henderson cited 'exceptional liquidity measures' as it blocked dealing on its £3.9 billion UK Property fund on Wednesday (July 6). The asset manager said: 'Despite a strong underlying portfolio, the decision was taken due to exceptional liquidity pressures on the funds, as a result of uncertainty following the EU referendum and the recent suspension of other direct property funds.'

Meanwhile, Columbia Threadneedle, which shuttered its £1.3 billion UK Property fund, said: ‘We have not been immune to the recent trend of retail outflows from the sector and so far these requests have been met from the cash balance retained within the Threadneedle PAIF.’

On Tuesday (July 5) two other asset managers suspended trading in their UK property funds, which saw M&G shutter its £4.4 billion (€5.17 billion) and its feeder fund, while Aviva Investors suspended dealing on its £1.8 billion fund.

The knock-on effect was started by Standard Life Investments which gated its property fund first on Monday (July 4). Commenting on the suspension of trading on its £2.7 billion UK Real Estate fund and all associated feeder funds, SLI said: 'The decision was taken following an increase in redemption requests as a result of uncertainty for the UK commercial real estate market following the EU referendum result.'

'The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns from the range, mix and quality of assets within the portfolio.'

Against this backdrop, Aberdeen has has presented its investors with an interesting dilemma - we won’t stop you redeeming, but you’ll have to pay a 17% exit penalty.

The asset manager said that it believes the fairest approach is to impose a dilution levy, which will both enable scared investors to exit its £3.4 billion UK Property fund, while protecting those who are happy to ride out the volatility.

An investigation by Modern Investor unearthed that UK local authorities' pension schemes have invested £1.7 billion in UK property funds, the largest among them being BlackRock and Schroders.

This series of closures has led the new chief executive of the Financial Conduct Authority, Andrew Baily, raise questions about daily pricing of property funds. He said they do not 'revalue naturally' and, speaking yesterday ahead of the most recent closures, Bailey said the regulator may have to re-examine sector liquidity rules.

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