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Property funds in crisis

Real_estate_fundFollowing the suspension of two Kames Capital property funds on Tuesday, other major asset managers have followed suit and gated property strategies due to market uncertainty caused by the global coronavirus outbreak.

On Wednesday, Janus Henderson, Columbia Threadneedle, Aviva Investors, Aberdeen Standard Investments, BMO GAM and LGIM all announced restrictions to trading on their property funds.

Despite Janus Henderson’s cash position to deal with a “reasonable” level of redemptions, the coronavirus pandemic has created “significant uncertainty”. The fund portfolio’s valuer – CBRE – advised the firm that the best option looking forward was to suspend trading on the strategy.

According to Janus Henderson, there is “material uncertainty around the valuation of UK physical properties across the market, and therefore by inference the assets in the portfolio, due to the Covid-19 pandemic”.

The firm stated the decision to suspend the fund is in line with new rules put in place by the Financial Conduct Authority.

Market commentator, Adrian Lowcock, head of personal investing at Willis Owen, said: “We should expect more fund suspensions over the next 24 hours and through this week. “ 

“This is another crisis for the open-ended property sector and a reminder that illiquid assets do not work well with daily dealing. With the FCA’s focus on liquidity the managers of such funds need to think how to offer their services to investors in a different structure,” he added.

Aviva Investors also cited “challenging market circumstances” as the reason behind the decision to suspend its property fund. The suspension will be lifted as soon as it was “appropriate to do so”.

A spokesperson said: “Although there is sufficient liquidity in the fund, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect.”

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