Domino effect as fund managers respond to investor jitters
Three more investment managers suspended their property funds in the wake of the Brexit vote.
Henderson, Canada Life and Columbia Threadneedle all confirmed their decisions yesterday afternoon, bringing the total to seven. One commentator described it as a “Brexodus”.
Dealing was suspended until further notice in the Henderson fund, the second-largest in the sector with total assets of £3.5bn.
The largest, M&G Property Portfolio, was suspended earlier this week, along with Standard Life UK Real Estate and Aviva Property Investment Trust.
Columbia Threadneedle and Canada Life became the fifth and sixth to suspend their property funds in the last few minutes.
There is no indication of when trading might resume, but Laith Khalaf, senior analyst at Hargreaves Lansdown, predicted in the Guardian it would be months.
The suspensions indicate a lack of investor confidence in the commercial sector and also means less cash will be available for office schemes. The future of this sector was being talked up until Brexit jitters hit.
The news follows the confirmation that Make’s 40 Leadenhall office tower would not progress until tenants are secured. Make is shedding 10 staff in a move founder Ken Shuttleworth blamed on Brexit. Other office towers are also in doubt.
A statement issued by Henderson blamed “exceptional circumstances” and said it wanted to “safeguard the interests of all investors”.
It said: “Uncertainty generated by the European Union referendum has had a negative effect on market sentiment and led to substantial withdrawals from property funds.
“The dealing suspension will allow for an orderly sale of some properties while liquidity is restored and help ensure that the strong attributes of the portfolio in terms of its mix of properties and quality tenant base are not compromised while cash is raised ahead of a re-opening.”
Property funds have limited liquidity because most of their money is tied up in physical buildings, leaving them vulnerable in the event of a rush by investors to withdraw their money. Fund managers will have suspended trading partly to avoid the risk of being forced into a fire sale of their built assets.