Open-ended property funds saw net outflows of £81m in April, the 31st consecutive month of outflows, according to data from Calastone.
Just over £5bn has left the sector in the past three years, equivalent to £1 in every £8 under management.
However, the April outflows were the lowest since September 2020, driven by a reduction in selling activity rather than an increase in buying.
Edward Glyn, head of global markets at Calastone, said: “Investors are looking to the post-pandemic boom that seems increasingly likely to take off in a synchronised fashion across the developed world.
“But it’s too soon to call a trend of improvement for property funds, as the post-pandemic shape of the industry is still being drawn. Record selling of property funds in March may simply have been an early shake out of those sellers wanting to crystallise capital losses before the end of the tax year.”
The news comes as the Financial Conduct Authority delayed the conclusion of its review into open-ended property funds which have been the source of industry discontent for years.
The watchdog is consulting on a number of changes to the open-ended property fund structure, including a potential lengthy notice period for redemptions, in an attempt to protect investors from losing control of their investments.
Mike Barrett, consulting director at the Lang Cat, said there was a real potential that property would become a "niche" asset class as a result of the proposed changes.
“The majority of clients will still end up investing in a model portfolio, [in] which operationally I don't think there's a way you could introduce notice periods.
“So if you want or need to invest in property, you [would have to] go into a more bespoke service with the unintended consequences will be there will be less people investing in property as an asset class, and those that do will probably have to pay more to do it.”
The aim of the consultation is to solve the fundamental mismatch of the illiquid nature of real estate that is held by funds which allow investors to trade daily.
This mismatch has led to the majority of open-ended property funds gating for withdrawals at various points over the past 10 years due to flurries of redemptions amid economic uncertainty - for example due to Brexit or the uncertainty surrounding the Covid-19 pandemic.
The longest period of suspension came last year, as real estate valuers enacted ‘valuation uncertainty’ clauses on the funds as they were unable to adequately value the properties held by the funds due to the pandemic.
However, the FCA said it would delay the decision whilst it receives feedback on a new structure it is proposing to solve the issue - the long-term asset fund.