UK property funds see brighter days ahead

UK property fund managers that have re-opened their funds after suspending dealing appear confident that the asset class remains attractive, despite the Brexit vote that gave them so many problems.

For example, Ainslie McLennan, co-manager of the Henderson UK Property fund that reopened to dealing on October 14, believes investor anxieties have evaporated in the months since the June 23 EU referendum. She notes that the market is still attracting a variety of homegrown and overseas buyers, with the latter benefitting from the pound’s decline.

The fund was able to reopen after selling seven of its underlying holdings despite the typically quiet period for investment activity over the summer. The sales raised the fund’s portion of liquid assets in cash and property securities to 14% and the fund had also completed a number of new purchases while trading had been suspended.

Some other funds have also managed to resume dealing since the post-Brexit vote suspensions. The suspensions were intended to allow for an orderly sale of properties to restore liquidity and meet redemption demands.

Standard Life Investments’ UK Real Estate fund resumed dealing in the past week.

Aberdeen Asset Management, which suspended its fund on July 4, reopened it a mere nine days later. However, investors faced a penalty redemption cost, which would reduce the value of their investments by 17%, if they still wished to withdraw.

Columbia Threadneedle Investments reopened its UK Property Fund on September 26 and Don Jordison, managing director of property at the firm, doesn’t foresee a repeat of the redemption spike that caused its suspension any time soon.

“The initial shock has passed, and this lower-for-longer rate environment means property’s regular income remains particularly attractive,” he said.

Jordison said Columbia’s decision to “avoid investing in the trophy property assets which have sprung up across London’s skyline in recent years” reduces the risk of the fund being a forced seller if there is a downturn.

Nonetheless, some funds remain suspended. Aviva Investors has suggested its Property Trust could remain closed until March 2017. Conversely, there is little indication of when M&G’s Property Portfolio, suspended July 5, will reopen. No official statement has been made, although a source close to the matter told Funds Europe that the fund needed to reach a cash holding of at least 13% before resumption of trading would be considered.

©2016 funds europe