Six property funds have now suspended trading – with Henderson, Canada Life and Columbia Threadneedle, joining M&G, Aviva and Standard Life.
This is more than half of the £25 billion Investment Association property sector; and Aberdeen has said it is posting exit restrictions on its fund until Monday.
Laith Khalaf, Senior Analyst, Hargreaves Lansdown; said that the property fund sector is now “on ice”, and will remain so until managers raise enough cash to meet redemptions. “These funds are therefore likely to be closed for weeks and months rather than simply a matter of days,” he warned. “Clearly there has been a knee-jerk reaction to Brexit in the commercial property sector, which may moderate over time.”
Investors have been cooling interest in commercial property since the beginning of the year, as the multi-year rally began to look overheated and concerns about the impact of a Brexit vote on the domestic economy grew. But Brexit proved an inflection point as the value of London property was predicted to fall 20% and both housebuilder stocks and property funds’ values began to tank.
Threadneedle’s head of wholesale for EMEA Gary Collins said that the firm had taken the decision to suspend trading on their property fund in the best interests of investors.
“Clients have got nervous and that has triggered outflows. But anyone who has ever bought or sold a house knows you cannot buy a house in a day,” he explained. “We believe placing restrictions on the fund is in our clients’ best interests and we will continue to work closely with platforms.”
Collins was quick to point out that the Threadneedle fund had less than 10% exposure to the central London market was made up of smaller lots with “no trophy assets”.
“We are not aligned with other funds on the market,” he said.
Despite the more diverse nature of the property fund, Threadneedle’s head of multi-asset Toby Nangle admitted that he had “significantly reduced exposure to commercial property” following the Brexit vote.
“We have been nervy about central London property for a while,” he said. “We have been more active than usual in our trading since Brexit, also reducing European equities exposure and exiting mid-cap UK stocks in the referendum.”