Investors in property funds run by Kames and Columbia Threadneedle have lost out because those firms switched the pricing on the funds.
Both companies have moved from 'offer' pricing to 'bid' pricing, which means the value of the units owned by investors in Columbia Threadneedle's £2.5bn UK property fund has fallen by 6 per cent.
They have done this to make it less attractive for investors to want to take their money out while market volatility is high, protecting those who wish to stay invested and meaning the funds don’t have to sell property while prices are falling.
It would also protect remaining investors because by selling property to meet redemptions, the fund would incur transaction costs which would be paid by the investors that remain in the fund.
The change has affected investors in the Threadneedle UK Property Authorised Investment Fund and the Threadneedle UK Property Authorised Trust.
Meanwhile investors in the £1bn Kames Property Income funds are down 5.7 per cent.
Because both funds are open-ended, if a large number of investors wanted to withdraw their capital at the same time, the fund must sell a building, which is time consuming.
Most such funds keep a portion of their assets in cash in order to meet normal levels of redemptions but if that cash buffer is eroded, then funds must act as they can’t sell property swiftly enough.
In the immediate aftermath of the Brexit vote, nine of the 12 funds in the IA Property sector had to close to redemptions, preventing investors from taking their money from the fund.
A spokesman for Kames said: "Following market uncertainty surrounding the potential impact of Brexit and the outlook for retail in the UK, we moved the pricing of the Kames Property Income Fund to a bid basis.
"This brings the fund into line with the vast majority of our competitors in this market, who had already moved their funds to a bid basis or had continued to apply it following the 2016 referendum. We decided to make the move to protect existing and continuing investors in the fund.
"The fund continues to deliver a consistently good level of income through its diversified portfolio and has a relatively low exposure to the UK retail sector compared to most of its peers."
The Financial Conduct Authority has expressed concern about open-ended physical property funds, and said the funds should suspend withdrawals at times of material uncertainty about the value of the assets.
David Scott, an adviser at Andrews Gwynne in Leeds, said the switching was likely to be the "start of many" as economic and market conditions worsen.
david.thorpe@ft.com
