UK property funds start lifting suspensions


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UK real estate funds have started to reopen after a six-month suspension, with one of the biggest funds in the industry announcing it will allow investors to buy and sell again from next week.

Columbia Threadneedle has announced that the £ 1 billion Threadneedle UK property investment fund (and its feeder fund) will resume operations on September 17, after being suspended on March 18 amid the height of the Covid-19 panic. and stock market volatility. At the time, the fund’s independent real estate expert, CBRE, said it was unable to properly assess the fund’s assets – but on Wednesday that was lifted, allowing the fund to reopen.

Gerry Frewin, Fund Manager for the Threadneedle Fund, said: “We appreciate that the suspension of trading in the Fund may have caused inconvenience to our clients, but the decision to suspend trading meant that no unitholder would be disadvantaged and guaranteed fair treatment of all. investors at a time of exceptional market uncertainty. ”

Wealth manager St James’s Place has also lifted the suspension of its real estate funds. Legal & General announced its intention to reopen the real estate fund on October 13. The trigger for these reopenings was the lifting by the Royal Institution for Chartered Surveyors (RICS) of its “material uncertainty clause” for the entire sector.

Adrian Lowcock, Head of Personal Investments at Willis Owen, says RICS ‘move is an important first step in allowing real estate funds to reopen. But he urged caution, not least because tense Brexit negotiations and rising Covid-19 infections mean the decision to reopen is not a simple one. “” Many funds are not sitting on high cash balances at the moment, and they will be desperate to avoid a scenario where they have to close again if redemptions are too high … Therefore, we do not think the situation is resolved for investors for now, and it could take weeks or even months for the funds to reopen. “

180 day rule?

The Threadneedle fund was one of many to halt trading in March, while one of the largest in the industry, M&G Property, closed in December 2019, before the coronavirus hit, closing offices, restaurants and shops. In July, we took an in-depth look at the year-to-date cumulative returns of these open-ended funds and their returns. At the time, only BMO Property Growth & Income had reopened to investors, and this fund invests primarily in shares of real estate companies rather than less liquid assets. But it was seen as a cautious first step for the industry.

In August 2020, the Financial Conduct Authority proposed that investors may have to give 180 days’ notice to trade these funds in order to resolve the ‘liquidity mismatch’ inherent in these products: investors want daily prices and trades, but the nature of the property means that daily valuations are harder to come by and buildings cannot be sold as easily as company stock.

“Fund suspensions exist to protect investors in exceptional circumstances. However, the FCA has seen repeated suspensions of these funds in recent years for liquidity reasons, which suggests there could be broader issues, ”the regulator said at the time. The industry and the regulator are still discussing the best course of action, with answers expected by November of this year and new rules coming next year.

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