Friday, 19 April 2024
Ten big open-ended property funds tracked by Morningstar, with a total of 6.5 billion pounds under management, stopped investors from getting their money out in mid March, saying valuers could not accurately assess real estate assets in a plunging economy.
With question marks over the future of office working, the retail industry in crisis and the housing market only just reopening, the price of property is set for a major readjustment, but a dearth of transactions means the scale of change is still unclear.
“This is a crisis unlike any other,” said Ben Sanderson, a director at Hermes Real Estate Investment Management
“In the short term, it’s going to be hugely challenging.”
Many of the Morningstar-tracked funds are aimed at retail investors who could take their money out daily, managed by household names like Aviva (AV.L) and Legal & General (LGEN.L).
Such funds also suspended during the 2008/09 financial crisis and after the 2016 Brexit vote because their hard-to-sell assets meant they could not meet daily redemption requests.
But this crisis has extended further into the 70 billion pound UK property fund sector.
For the first time, funds aimed at institutional investors like charities and pension funds have also locked their doors.
These funds typically only allow redemptions monthly or quarterly.
Twenty of the 29 institutional-focused funds in the MSCI/AREF UK All Balanced Property Fund Index have suspended or deferred redemption payments, according to a Reuters survey, including funds managed by BlackRock (BLK.N), Federated Hermes (FHI.N), Savills and Schroders (SDR.L).
Three with different structures have remained open and six did not respond to requests for comment.
Industry sources said it was unlikely funds would unfreeze before September, and what happens then is unclear.
Suspensions enable funds to treat customers equally, preventing a rush for the exits which means slow movers get a lower price for their investments.
The funds say these suspensions are related to valuation problems and, unusually, do not follow a flood of redemption requests.
Aware of her elements, Neha writes the best articles across industries including electronics & semiconductors, automotive & transportation and food & beverages. Being from the finance background she has the ability to understand the dynamics of every industry and analyze the news updates to form insightful articles. Neha is an energetic person interested in music, travel, and entertainment. Since past 5 years, she written extensively on sectors like technology, finance and healthcare.
Smarter Decisions with Smart News
Smart Market News is committed to getting its readers the latest updates and insights on industries that help in making “smarter” business decisions. With insights and inputs from corporate decision makers, we bring you the stories of adopting innovative solutions and strategies that have been changing the world. Our editorial insights on products, solutions, companies, and adoption of best practices not only help in understanding the markets better, but also prove to be a complete package for your information needs.
Pro-nuclear energy protesters rally against Greenpeace in Paris 
Credit Suisse taps Santangelo as global co-head of healthcare 
