Investments  

LGIM drops fair value pricing on £2.3bn property fund

LGIM drops fair value pricing on £2.3bn property fund

Legal & General Investment Management (LGIM) has removed the fair value pricing adjustment on its £2.3bn UK Property fund citing improved confidence in the market.

The fund will now be priced using the pre-referendum third party valuation methodology which will be reviewed on a monthly basis, effective immediately.

Fair value adjustments were made to the fund in the immediate aftermath of the June 23 referendum in order to deter redeeming investors, after the vote prompted a plunge in confidence among UK commercial real estate fund holders.

Article continues after advert

LGIM originally introduced a 5 per cent price adjustment and as sentiment worsened increased this to 15 per cent by July 6. However, the firm slowly brought this back down to 7.5 per cent towards the end of the month, and has now removed it completely.

The fund house said in a statement: “We have recently seen a marked increase in the level of confidence from our valuers. The ‘uncertainty clauses’ on valuations which they introduced after the referendum are being updated to reflect the improved conditions.

“We expect that the caveats will be withdrawn completely in the coming weeks. As a result, and following our latest fair value pricing assessment, we feel that we no longer need to apply an adjustment.”

It continued to say that the fund’s liquidity was positioned well enough ahead of the referendum to be able to meet all redemption requests and to prevent temporary suspension of dealing or selling assets at a marked discount.

LGIM was one of few among its peers to not suspend trading on its property fund. Canada Life Investments recently reopened its own portfolio to investors, but other fund houses remain reluctant to do so until cash levels rise substantially.