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Wealth managers cut UK property exposure over liquidity concerns

UK real eastateWealth managers have “significantly” reduced their exposure to UK property following the suspension of the M&G and Prudential UK property funds last year, a study has found.

A total of six advisor groups have removed IA UK Direct Property sector funds from their portfolios, according to the latest data from FE fundinfo.

Ten funds in the sector have been removed overall – the highest from one sole sector – Threadneedle’s UK Property Authorised Investment IGA, L&G’s Property Feeder and M&G’s Property Portfolio funds are among those to be ditched.

Oliver Clarke-Williams, portfolio manager at FE Investments, said: “The suspension of M&G and Prudential underlines the issue of liquidity in the sector and with the FCA looking at the nature of open-ended funds and investor redemptions more broadly, some wealth managers have evidently seen more trouble ahead for the sector.”

The research also highlighted a decline in popularity of targeted absolute return as an investment strategy, as wealth managers removed six funds from the sector from their portfolios.

Wealth managers have, however, increased exposure to equities.  The IA UK All Companies, IA Equity Income and IA UK Smaller Companies sectors all saw wealth managers increasing their exposure in these areas, with 18, 9 and 6 funds respectively added to the index.

Clare-Williams added: “Equities have been an interesting story throughout 2019. Our panelists’ weighting in the asset class is largely a reflection of the impact of continuing low interest rates, which looks set to extend well into 2020. In terms of the UK, equities here have persistently lagged global markets and are sitting on fairly low valuations at the moment.

“The increased weighting in the index suggests that many wealth managers are hoping that now the uncertainty around Brexit appears to have diminished somewhat, UK equities will rerate in line with other developed markets.”

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