Legal & General Investment Management (LGIM) has increased the “fair value adjustment” on its £2.5bn property fund by 10 percentage points as open-ended funds in the sector continue to deter withdrawals.
LGIM had initially applied an adjustment of 5 per cent on the UK Property fund and feeder funds last week, but upped this to 15 per cent yesterday (July 6).
It has also reduced its bid-offer spread to 0 per cent, essentially allowing investors to enter the fund free of charge. Normally the fund uses the spread to cover transaction costs.
The firm’s decision to reduce the value of investments in the fund comes after Aberdeen increased the fair value adjustment on its own UK Property fund from 4 per cent to 17 per cent overnight.
An LGIM spokesperson said: “The adjustment has been made considering the broader market response and other economic metrics.
“We will continue to monitor market events closely, using all available sources and our experience of the property market. This will ensure we reflect the price of the fund fairly for those investors who might be considering investing or redeeming, and those who wish to remain invested in the fund.”
Both LGIM and Aberdeen have refrained from indefinitely suspending trading, however – the tactic employed by Columbia Threadneedle, Aviva Investors, Standard Life Investments, M&G, Henderson and Canada Life Investments for their UK property portfolios.
So far this week, the industry has seen well over £14bn of property assets gated to redemptions with a further £8bn facing fair value adjustments.
The £932m Kames Property Income fund also made a downwards adjustment of 3.7 per cent, though this was prior to this week’s suspensions.
The changes have come as nerves increased on the outlook for UK commercial property in the wake of the UK’s decision to leave the European Union.
UK property had already come under pressure in the run-up to the June 23 referendum. The IA UK Property sector endured a net £500m in outflows in April and May, according to Investment Association statistics.
Those redemptions had seen a spate of funds switching from offer to bid pricing in the run-up to the vote - moves which effectively wiped 5 per cent off returns for investors wishing to redeem.
