Henderson ‘vulnerable’ to property fund outflows

Both Standard Life Investments and Aviva have suspended trading in their UK real estate funds after investors tried to pull money from the investment vehicles amid concerns over the UK’s decision to exit the European Union.

Peter Lenardos, managing director of investment bank RBC Capital Markets, said Henderson appears to be the asset manager which is the “most vulnerable” to the negative sentiment in the UK commercial property sector.

He said Henderson’s £4bn UK Property fund has daily liquidity and is therefore “highly susceptible” to outflows.

At the end of last year, Henderson’s assets under management in property amounted to £4.2bn, which was 4.6 per cent of the company’s total AUM, according to Mr Lenardos.

While the fund is currently still trading, he said the company is probably monitoring flows closely.

A spokeswoman for Henderson told FTAdviser the company had no update on the positioning of its property funds.

Last week, Henderson lowered the price of its UK Property fund in the wake of encroaching fears about how the Brexit would affect prices in the underlying market.

Mr Lenardos also said Aberdeen Asset Management was threatened by its exposure to commercial property, while he argued the firm is less vulnerable compared to Henderson.

According to the RBC boss, 4 per cent of Aberdeen’s assets under management reside in property, of which 1 per cent of the company’s total assets are retail-focused with daily liquidity.

Aberdeen did not respond to FTAdviser’s request for comment in time for publication.

Schroders was another fund house highlighted by Mr Lenardos as one heaviliy exposed to negative sentiment in the real estate sector, with 3 per cent of its total assets under management exposed to property.

He pointed out, however, the funds are almost entirely institutional and on a quarterly redemption cycle, meaning the assets under management are “stickier” than retail business with daily liquidity.

A spokeswoman for Schroders echoed this, adding its property funds are mostly institutional, have very little direct real estate exposure, and are therefore not greatly affected by shifts in sentiment towards property.

If dislocations persist we will take steps as appropriate. BMO spokeswoman

Mr Lenardos added: “We continue to believe share prices for the asset managers sector are likely to remain volatile as high beta proxies for market movement and sentiment following the UK’s decision to leave the EU.”

Meanwhile, L&G has told shareholders its £2.5bn UK Property fund remains “well positioned” in terms of liquidity and asset management.

In an update seen by FTAdviser, it said it currently retains over 20 per cent of its net asset value in liquid assets, the majority of which is held in cash, and is able to boost its cash position if needed.

A spokeswoman for BMO Global Asset Management, which manages a number of F&C property investment vehicles, said the company was “closely monitoring” its funds and underlying asset prices.

“We acknowledge the market volatility and will take a measured and considered approach. If dislocations persist we will act in the best interests of the fund shareholders and take steps as appropriate.”

On Friday (1 July), M&G announced it was reducing the net asset value of its £4.6bn M&G Property Portfolio in the wake of market uncertainty following the outcome of the referendum.

A spokeswoman for M&G said the company is monitoring the situation closely and will collectively inform shareholders in the first instance if there are any changes.

Paul Milburn, investment analyst at Lowes Financial Management, said Henderson’s decision to adjust the market value of its property fund was made because there is less conviction in the current prices in the property market.

This, he said, has been communicated to the fund managers by independent valuers.

“The fund managers believe that this is in the best interest of current investors, believing that giving too high a price to those investors selling today would have disadvantaged those remaining in the fund.”

katherine.denham@ft.com