Brexit: Three more property funds forced to suspend withdrawals

Columbia Threadneedle, Henderson Global Investors and Canada Life will not allow customers to cash in property fund shares, citing liquidity pressures

Ben Chu
Wednesday 06 July 2016 17:15
The fund managers cited a lack of liquidity
The fund managers cited a lack of liquidity

Another three commercial property funds have been forced to suspend redemptions as post-Brexit fears for the sector among retail investors continue to snowball.

Columbia Threadneedle, Henderson Global Investors and Canada Life this afternoon said they will not allow customers to cash in shares in their property funds, citing liquidity pressures.

This follows similar suspensions of withdrawals from the flagship commercial property funds of Standard Life, Aviva and M&G earlier this week.

“Over half of the property fund sector is now on ice, and will remain so until managers raise enough cash to meet redemptions” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

“To do that they need to sell properties, and as any homeowner knows, that is not a quick or painless procedure”

Mr Khalaf said these funds were likely to remain closed for months.

In a statement Henderson said: “Despite a strong underlying portfolio the decision was taken due to exceptional liquidity pressures on the funds, as a result of uncertainty following the EU referendum.”

Columbia Threadneedle said: “The temporary suspension of dealings allows sufficient time for the orderly sale of assets and protects the interests of all investors”.

Canada Life said it made the decision due to “ongoing uncertainty around the pricing of commercial property assets, following the vote to leave the EU, and the recent rise in requests to withdraw...from the property funds”.

In its latest Financial Stability Report, published yesterday, the Bank of England warned asset valuations in the commercial real estate market had “become stretched” before the referendum vote and identified the sector as one of the channels through which the shock Brexit result could transmit risks to financial stability and the wider economy.

Open-ended commercial property investment funds pool investors’ money to buy offices, factories and shopping centres and other assets. Their shares are normally freely tradable daily, but a rush of redemption requests by investors can create problems in meeting such demands due to the illiquid nature of their underlying assets and limited cash buffers.

According to the Bank, such tradable funds now account for around 7 per cent of total investment in UK commercial property and have around £35bn under management.

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