Property Funds Shuttered Over Uncertain Asset Values

Property funds have taken a bashing from the stock market slump triggered by the coronavirus outbreak.

Funds were already on a shaky foundation with the M&G Property Portfolio in lockdown stopping investors from liquidating their holdings.

The £2.5 billion fund is still running day-to-day  collecting rents and reporting as normal.

Investors took £1.1 billion from the fund last year, with managers blaming Brexit uncertainty and struggling retailers closing stores or trying to renegotiate cheaper rents as the reason for the run.

Now, two more property funds have suspended trading as fashion retailer Laura Ashley and technology store Carphone Warehouse announce the closure of nearly 700 stores and up to 4,500 job losses.

Protecting investor interests

Janus Henderson shuttered its UK Property Fund explaining experts could not accurately value the fund due to market conditions and the coronavirus outbreak. The suspension is under review every 28 days.

“Given this uncertainty, the board has decided to temporarily suspend dealings in the Janus Henderson UK Property fund and its associated feeder fund to protect the interests of all investors,” said a spokesman.

“We have historically maintained a cash position to meet a reasonable level of redemptions. However, the Covid-19 pandemic has created significant market uncertainty.”

Also under suspension are the £500 million Kames Capital  and the £460 million Aviva Investors Property Funds, both explaining valuers cannot give an accurate figure for property held.

“Although there is sufficient liquidity in the fund, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect,” said an Aviva spokesman.

More fund suspensions expected

He added that the suspension would be lifted ‘when appropriate to do so’.

Other commercial property funds are expected to follow suit over the next few days.

New fund rules imposed by the Financial Conduct Authority are due in September. They require property funds to automatically suspend trading when valuers are uncertain over pricing 20% or more of a fund’s assets.

Ryan Hughes, head of active portfolios at investment platform AJ Bell, said: “Investors will understandably find these closures distressing at such an uncertain time in markets. However, there’s nothing they can do now but wait it out and hope that the suspensions don’t drag on for too long.

“The length of the M&G closure highlights that it’s not a quick task to offload large property assets in order to generate cash, and current market conditions will only make that harder.”

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