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Aberdeen’s Chaplin on why Property funds gated

Aberdeen’s Chaplin on why Property funds gated

Surprise at the outcome of the European Union referendum a tendency to over-react was behind the problems with open-ended property funds immediately post-Brexit vote, says Russell Chaplin, chief investment officer for Aberdeen Asset Management’s property division.

Speaking to Emma Ann Hughes, editor of FTAdviser and Financial Adviser, Mr Chaplin said it was understandable that Property fund investors panicked in the aftermath of the Brexit vote.

He said: “People were considering what the effect would be on business services, the impact on central London, the office market in central London especially, and a realisation that within their Property funds, they might be holding those kind of assets.

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“Actually most funds don’t hold highly concentrated holdings in any of those areas, so I think there was a tendency to over-react to that short term news, even though it was obviously a surprise for many people.”

Although the Financial Conduct Authority (FCA) has been keeping an eye on open-ended property funds as a result of the mass suspensions in dealing in the weeks following the referendum vote, Mr Chaplin does not believe there will be big rule changes as a result of what happened to property funds.

Speaking in August, he said: “The question for the FCA is what it is trying to resolve. There are nine funds which closed immediately after the vote. Four remain open and five are suspended, and it is important to look at what has worked well and what has worked less well over that period.

“Certainly what would be the worst thing to do is to end up putting in recommendations that bring the standard of things down to the lowest common denominator across the industry.

“This is an opportunity to take a look at what works and try to enhance that.”

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Some funds do remain suspended, as a result of a lack of liquidity within the funds, and this suspension can take some time, although he said it was difficult to tell how long this would last for.

Mr Chaplin also said advisers should tell clients to remind themselves why they invested in the property funds in the first place.

“Typically the answer would be to get some income, because the income on these funds is relatively good compared with the yield on bonds.

“They will also be seeking some long-term capital growth, which is typically linked to economic growth and that will continue, and some diversification in the portfolio outside of equities other asset classes.

“These features still exist - and if clients still want those features, then it is worth sticking with the funds.”