Investors pulled more than £68m from Columbia Threadneedle’s UK Property fund in the month of the fund's reopening.
According to estimates from Morningstar, £68.5m was withdrawn from the fund in September — more than double the £25.4m withdrawn in the March exodus.
Columbia Threadneedle reopened its property fund on September 16 after it had been suspended alongside all other ‘bricks and mortar’ portfolios since the third week of March.
It was one of the first to open its gates to dealing, second only to St James’s Place, while a number of property funds in the market remain suspended.
The £68.5m pulled from the fund in September accounts for about 7 per cent of the fund’s assets under management.
Fact sheets show the fund held about 20 per cent of its assets in cash as at August 30 and FTAdviser understands the fund remains within its cash reserves targets of 5 to 15 per cent.
Alastair Caw, head of UK wholesale at Columbia Threadneedle Investments, said: “It’s important that we put our clients’ needs first and we are pleased that we were able to open the Threadneedle UK PAIF as soon as we could after the material uncertainty clause was lifted.”
Ben Yearsley, investment consultant at Fairview Investing, said the level of outflows was “absolutely no surprise”.
He said: “Investors have been spooked twice in four years by physical property funds closing and are taking the opportunity to withdraw.
“I expect all physical property funds to have similar levels of outflows and for them to continue in October.”
Jason Hollands, managing director at Tilney, agreed, noting that 2020 was “hugely challenging” for the property sector.
However, Mr Hollands added that fund groups would have a reasonable expectation of the pipeline of outflows through talking to their clients during the period of suspension, so could manage their liquidity accordingly.
Although Adrian Lowcock, head of personal investing at Willis Owen, said the outlook for the property sector was “pretty suppressed at the moment”, he thought it would be “dangerous” to extrapolate one set of outflows into a trend at this point.
He added: “It is not a couple of weeks of flows that matter but a constant outflow as eventually, this gets to a tipping point and funds are either forced to sell investments or suspend.”
What happened
All UK property funds were suspended in the third week of March at the start of the coronavirus crisis after independent valuers were unable to provide accurate and reliable valuations for all properties held in the funds.
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.
Portfolios were gated because the coronavirus crisis had caused material uncertainty in the market.
It was the second time in four years that investors in property funds had been locked away from their cash.
In July 2017, various large property funds were forced to pause trading after thousands of investors panicked in the aftermath of the EU referendum and pulled out of the investment vehicles.
Concerns about liquidity in these open-ended products have not gone away. 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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