Investors withdraw £ 5.6bn from UK property funds over fears of Covid variant

Investors have withdrawn £ 5.6bn from UK property funds over the past two and a half years over fears that the Covid variants will deal another blow to the already besieged property sector.

Calastone figures, which track the inflow and outflow of money in the UK from financial advisers, fund supermarkets and wealth managers, show investors withdrew £ 445million from property funds in May – the second highest monthly exit figure on record.

The buybacks released last month mean investors have now withdrawn a total of £ 5.6bn from UK property funds in the past 32 consecutive months, according to Calastone.

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Last month’s withdrawals were not enough to surpass record outflows from UK property funds in March, when investors bought back £ 589million.

Most headed for the exit as soon as real estate funds started lifting trading restrictions they put in place last year once it became difficult to get accurate valuations on assets. such as hotels, shops, offices and restaurants as national lockdowns were imposed.

Despite the slowdown in real estate fund outflows in April, the pace of withdrawals accelerated last month after some experts called for a postponement of the lifting of Covid restrictions on June 21 after the discovery of an Indian variant, which has a higher transmission rate than other strains.

Edward Glyn, head of global markets at Calastone, said investors were increasingly concerned about the potential impact on the UK real estate sector.

“Anything that delays returning to offices and removing capacity limits in hospitality, retail and entertainment venues is bad for commercial real estate in the short term,” he said.

“Recent survey data suggests the long term could be darker as well, as companies plan to reduce floor space in the future. This appears to have stimulated the sale of real estate funds by investors who appear to be looking for reasons to be negative about the asset class. “

READ Investors fear more victims of real estate funds after Aviva shutdown

Last month Aviva Investors announced the permanent closure of its UK real estate fund, saying it had become “increasingly difficult” to generate positive returns while providing liquidity to investors wishing to cash in when it reopens.

Some market commentators have suggested that the shutdown of Aviva’s fund, which managed £ 367million, could be the first in a long series.

The fund, which had 23% of its assets in cash and recorded an 11.9% drop in returns over the year until the end of March, was one of only two real estate vehicles not to resume trading. activities after suspensions were imposed last year due to the onset of the pandemic.

UK property funds are facing a potential overhaul in their liquidity needs. Last year, the Financial Conduct Authority proposed that investors in real estate funds be required to give 90 to 180 days’ notice when they wish to withdraw their money.

Last month, the regulator said it would not make a final decision on real estate funds until the third quarter at the earliest, so it could take into account comments from a separate consultation on creating a new “long-term asset fund” vehicle for the wider market.

To contact the author of this story with comments or news, email David Ricketts

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