Legal and General Investment Management is to reopen its open-ended property fund next month as the board is now “confident” about lifting the suspension.
In an update on its website, LGIM said its authorised fund manager, L&G Unit Trust Managers, intends to reopen the LGIM UK Property Fund, and its feeder fund, at 12pm on October 13 as the three conditions for reopening have now been met.
In particular the board was satisfied that the material uncertainty clauses applies to below 20 per cent of the assets in the portfolios; that valuations from the fund’s independent valuer remain accurate; and the fund’s liquidity is well-placed to meet investor intentions.
LGIM said: “We will continue to monitor investor intentions and the factors outlined above in the lead up to the planned opening date. Should anything materially change, further communications will be issued.
“The funds are opening as soon as practicable, allowing for communication with the broad client base and ensuring sufficient notification periods are enabled.”
LGIM is the third property fund to open its doors since the Royal Institution of Chartered Surveyors earlier this month (September 9) recommended a general ‘lifting’ of material valuation uncertainty from areas of UK real estate.
Material uncertainty means valuers were unable to value the assets within the funds with the same degree of certainty as would otherwise be the case.
Rics' announcement essentially allowed property funds to reopen if the asset manager saw fit.
But most managers did not immediately respond. St James’s Place bucked the trend and opened its fund on the first day, while Columbia Threadneedle’s equivalent portfolio is set to reopen to investors tomorrow (September 17).
Others, such as Aegon and Aberdeen Standard Investments, said their funds would stay gated until at least their next valuation point, which is at the end of September.
Meanwhile Aviva is monitoring the market, Royal London said it was working with its valuation agent while Janus Henderson, BMO and M&G Investments are keeping their funds suspended to allow for the raising of additional liquidity.
How it works
Rules announced by the Financial Conduct Authority last year require property funds to automatically suspend when their valuers find material uncertainty over the pricing of 20 per cent or more of their assets.
Major UK valuation houses have been meeting twice a week — in conjunction with Rics — to discuss market activity and decide if it is time to lift the material uncertainty clause.
If 80 per cent of a fund’s assets are in sectors of the market where the clause no longer applies, they are allowed to re-open.
The 'bricks and mortar' UK property funds available to retail investors, with about £13bn of assets between them, were suspended in the third week of March.
Portfolios were gated because the coronavirus crisis had caused material uncertainty in the market.
Meanwhile the FCA is consulting on rules which would require investors to give notice — potentially up to 180 days — before their investment is redeemed from an open-ended property fund.
It is an attempt to curb the “liquidity mismatch” between the underlying property held in such funds and the daily basis on which investors buy and sell units.
imogen.tew@ft.com
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