More than 1,220 investors removed the £4bn Henderson Property fund from their portfolios in just over a month, according to figures from FE, as the fund house became the fourth to suspend trading.
The fund house today (6 July) announced it had temporarily suspended all trading in the Henderson UK Property PAIF and the Henderson UK Property PAIF Feeder fund to “safeguard the interests of all investors”.
Less than an hour later, Columbia Threadneedle announced it had suspended dealing in the Threadneedle UK Property Authorised Investment fund and the Threadneedle UK Property Authorised Trust Feeder fund, making it the fifth fund house to halt trading.
Threadneedle’s £1.4bn UK Property fund came second on FE’s real estate fund list after 543 investors backed out of the vehicle between 1 June and 5 July.
In a statement released today, a spokesman for Henderson said: “Despite a strong underlying portfolio, the decision was taken due to exceptional liquidity pressures on the funds.”
He said the decision was a result of uncertainty after the recent suspension of other direct property funds and the EU referendum.
Between 1 June and 5 July this year, 1,228 investors pulled out of Henderson’s property fund.
A spokeswoman for Henderson declined to comment on the FE figures.
Yesterday (5 July) Henderson was named by analyst at RBC Capital Markets, Peter Lenardos, as the asset manager “most vulnerable” to negative sentiment in the UK real estate property sector, with property funds comprising 4.6 per cent of the firm’s total assets under management.
In the past two days, Standard Life Investments, Aviva and M&G have all temporarily suspended trading in their flagship property funds, as investors grow increasingly nervous about the UK’s property market in the wake of the EU referendum.
Over the past six months, the Henderson Property fund has lost just over 7 per cent, according to FE, lagging behind the Investment Association Property sector, which has delivered 5.8 per cent over the same period.
The £4.7bn M&G Property Portfolio, which halted trading yesterday (5 July), has seen 278 investors leave since 1 June, and is ranked 10th on the FE list, alongside the Aviva Property Trust, which has also seen 278 investors drop the fund from their portfolios.
Cathy Pitt, a funds partner with law firm CMS, said it might be “timely” for investors to focus on closed-ended vehicles like real estate investment trusts (Reits), particularly with the Financial Conduct Authority reviewing open-ended funds which hold illiquid assets.
Naomi Heaton, chief executive of property investment fund London Central Portfolio, warned investors about the “empty promises and liquidity trap” of open-ended vehicles, adding we should learn the harsh lessons of the global financial crisis.
She also recommended investors turn to the “safer” option of closed-ended funds, because they have a longer term horizon and do not bank on a speedy exit.
“While open-ended funds, such as Aviva, purport to offer liquidity, in a falling market these funds suspend redemptions when investors rush to withdraw money, with disastrous consequences.”
Paul Milburn, investment analyst at Lowes Financial Management, said while investors have rushed to the door he has no plans to steer away from some funds in the property sector.
He said 75 per cent of the return from commercial property comes from rental income and rental income growth over the longer term, which he said is helpful for income producing portfolios.
“The suspension of the trading in these funds of course causes some concern, and highlights again whether funds with illiquid assets such as physical property should be daily pricing.
“For now we believe that the property fund managers have been prudent in their actions, by implementing the adjustments to the value of the underlying properties and by suspending trading, in order to provide more realistic valuations and protect the unit holders.
“For the moment, we will continue to allocate to our favoured property funds.”
katherine.denham@ft.com
