Investors have been barred from withdrawing their money from 10 real estate funds with a combined value of £ 10.9bn after appraisers said they could not accurately assess their assets as stock markets plummet. amid the coronavirus pandemic.
Fund groups Legal & General, Aberdeen Standard Investments, Janus Henderson, Columbia Threadneedle, Aviva Investors, BMO and Kames Capital have suspended trading in their real estate funds.
CBRE, appraiser of the £ 2bn property of Janus Henderson in UK, £ 1.7bn of Standard Life Investments UK Real Estate, £ 1.1bn of Threadneedle UK property, of £ 500million from ASI Global Real Estate and £ 504million from Kames Property Income funds, said the coronavirus pandemic had materialized uncertainty over the value of property in the UK.
Knight Frank, who values UK legal and general property of £ 2.9bn, Aberdeen UK property of £ 1.1, BMO Growth and Income real estate funds at £ 584m British pounds sterling, BMO UK real estate funds of 501 million pounds and Aviva Investors UK property funds of 461 million pounds, rendered the same judgment.
“The Covid-19 virus has had an impact on the UK property market and made it difficult to assess property held by the funds with the same degree of certainty as it would otherwise be,” Aviva said in a statement to investors.
“This calls into question our ability to calculate the price used to buy and sell stocks / shares in funds, and we believe that there is a significant risk that investors can buy and sell stocks / shares at a price that does not not accurately reflect the value of those shares / units. If we allow transactions to continue, some investors could benefit at the expense of others. ‘
The series of suspensions in the real estate fund industry echo the widespread freezing of the same funds after the Brexit vote and during the financial crisis.
But while real estate funds had previously blocked withdrawals due to liquidity concerns, as they were unable to sell properties quickly enough to fund investor withdrawals, in this market crash valuation issues have emerged. resulted in suspensions.
BMO stressed that the suspension of its two funds was “not linked to a liquidity event”. Janus Henderson said his real estate fund managers Ainslie McLennan and Marcus Langlands Pearse were maintaining “a cash position to achieve a reasonable level of redemptions”, standing at 17.4% of the fund at the end of February.
The suspensions comply with Financial Conduct Authority (FCA) rules due to go into effect in September, which require real estate funds to be suspended in the event of “material uncertainty” over 20% of their assets.
“With the FCA continuing to review the suitability of illiquid assets in traded funds on a daily basis, this must certainly spell the end of such structures to avoid undermining investor confidence in the fund industry,” said Ryan Hughes, head of fund industry. active portfolios at AJ. Bell.
As always, rival real estate investment firms and real estate investment firms have remained open for trading on the London Stock Exchange, although their stock prices were hit hard in the past month and are trading well below their net asset value (NAV).
“At least investors in closed-end real estate funds can get out, although prices currently imply discounts of 47% on average from last net asset values,” said Christopher Brown, investment funds analyst at JPMorgan Cazenove.