British property funds are set to remain frozen for months as the market is impossible to value due to the coronavirus crisis, and some may need to change structure to survive, industry sources say.
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.
The Insight Partners is a one stop industry research provider of actionable intelligence. We help our clients in getting solutions to their research requirements through our syndicated and consulting research services. We specialize in industries such as Semiconductor and Electronics, Aerospace and Defense, Automotive and Transportation, Biotechnology, Healthcare IT, Manufacturing and Construction, Medical Device, Technology, Media and Telecommunications, Chemicals and Materials.
Severity: Warning
Message: count(): Parameter must be an array or an object that implements Countable
Filename: amp/news_details_amp.php
Line Number: 252
Backtrace:
File: /home/smartmarketnews/public_html/application/views/amp/news_details_amp.php
Line: 252
Function: _error_handler
File: /home/smartmarketnews/public_html/application/controllers/Amp_controller.php
Line: 41
Function: view
File: /home/smartmarketnews/public_html/index.php
Line: 315
Function: require_once
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.
media@smartmarketnews.com | sales@smartmarketnews.com
Contact Us