Janus Henderson has suspended trading in its UK Property fund — the third open-ended property portfolio to shut its doors to dealing since December 2019 and the second in 24 hours.
In an update to investors, published yesterday (March 17), the asset manager said its independent valuer, CBRE, had been unable to accurately value the fund's portfolio amid the coronavirus pandemic.
The £2bn fund has been suspended as of the start of this week (March 16) meaning no buy or sell trades have been accepted as of midday Monday. The suspension will be reviewed every 28 days.
Janus Henderson said: “Given this uncertainty, the board...has decided to temporarily suspend dealings in the Janus Henderson UK Property fund and its associated feeder fund to protect the interests of all investors.
“We have historically maintained a cash position to meet a reasonable level of redemptions. However, the Covid-19 pandemic has created significant market uncertainty.”
The suspension would allow the valuer to better understand the impact of the crisis on direct property market valuations, the fund manager told investors.
It comes as Kames Capital also suspended dealing in its £500m property fund, citing the same reasons at Janus Henderson, and after M&G’s decision to suspend its £2.3bn Property Portfolio in the run-up to the December general election. That fund remains gated.
The three suspensions mean almost £5bn of customer assets are now locked in suspended property funds.
Many physical property funds have performed well this year as other asset classes slumped — partly because of the post-election bounce enjoyed by UK property, and in part because portfolios' valuations, unlike their dealing terms, do not change on a daily basis.
Janus Henderson said the material uncertainty surrounding property valuations extended “across all UK property fund valuations”.
It added: “We are acutely aware of the frustration that the dealing suspension may cause you and would like to thank you for your patience during this challenging period.”
Rules announced by the FCA last year, due to come into effect in September 2020, require property funds to automatically suspend when their valuers find material uncertainty over the pricing of 20 per cent or more of their assets.
Ryan Hughes, head of active portfolios at AJ Bell, said: “Investors will understandably find these closures distressing at such an uncertain time in markets. However, there’s nothing they can do now but wait it out and hope that the suspensions don’t drag on for too long.
“The length of the M&G closure highlights that it’s not a quick task to offload large property assets in order to generate cash, and current market conditions will only make that harder.”
Mr Hughes added that with the FCA looking at the appropriateness of illiquid assets in daily traded funds, this “must spell the end” of such structures to avoid damaging the confidence of investors in the funds industry.
Issues surrounding illiquid holdings in open-ended funds were highlighted on several occasions in 2019, most notably by the Neil Woodford saga.
Former-star fund manager Mr Woodford was forced to suspend his flagship Equity Income fund after redemptions ran at £9m per working day in May. The level of illiquid holdings in the portfolio meant he was unable to meet the requests.
It was again highlighted by M&G’s gating in December.
In the aftermath the FCA promised action "within weeks" and later issued a joint report with the Bank of England which floated proposals to curb the "mismatch" between redemption terms and funds' liquidity.
The proposals included a shift in the way the liquidity of funds was assessed and that investors who pulled their cash should receive a price for their assets which reflected the discount needed to sell in the specified time period.
The FCA is expected to update on the development of new rules for open-ended funds later this year.
imogen.tew@ft.com
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