L&G makes a further 10% cut in its property fund

More than half the £25bn property fund sector is now suspended with Columbia Threadneedle Investments and Henderson Global Investors yesterday suspending dealing in property funds worth £5.3bn.

It said: “The property market itself may take some time to find its level, but we believe that the same factors that made property a good long-term investment yesterday remain true today”. It said Wednesday that it was suspending trading in its property fund for 24 hours starting noon Wednesday, after which time an investor who wanted to withdraw would need to accept a 17% reduction.

“The dominoes are starting to fall in the United Kingdom commercial property market”, said Laith Khalaf, a senior analyst at Hargreaves Lansdown.

London’s City district; Canada Life cites “ongoing uncertainty around the pricing of commercial property assets following the vote to leave the European Union” in suspending trading.

The other four largest funds investing in United Kingdom commercial property are managed by Kames Capital, Aberdeen Asset Management, Legal & General Investment Management, F&C and Royal London Asset Management.

This run on the funds shows how the cost of Brexit is spreading, and also highlights the vulnerability of funds that offer daily redemptions while investing in illiquid assets. Demand, centered on London, has come from retail investors, pension funds, sovereign wealth funds, insurance companies and private equity firms.

It a follows similar decisions by savings and investment groups Standard Life on Monday and Aviva earlier on Tuesday.

“We can’t ignore what’s happening from a redemption request perspective or the closing perspective”, Wayne Bowers, chief executive officer of the global asset management arm of Northern Trust Corp, which manages about US$900 billion (RM3.6 trillion) of assets, said in an interview in Sydney.

CEO Martin Gilbert (pictured) stressed the defensive positioning in a statement and said: ‘Our focus has been, and continues to be, treating all customers fairly.

London’s upmarket estate agency Foxtons said that already prior to the referendum there were signs that the capital’s high-end property market was slowing after a hike in taxes on transactions the government imposed in order to prevent a bubble, and cautioned that its profits would be hit this year.

Standard Life’s listed real estate fund (SLI.L) closed up 3.66 percent, while F&C Commercial Property Trust (FCPTL.L) was up 5.2 percent and the Schroder Real Estate Investment Trust (SREI.L) climbed 5.7 percent.

Some long-term players said they may look to snap up bargains.

Columbia Threadneedle halted its £1.39-billion PAIF and feeder funds and Canada Life froze four funds totalling £450 million.