Pound down sharply amid concerns for British property

Henderson was next to suspend its £3.9bn property fund “to safeguard the interests of all investors”, followed by Columbia Threadneedle.

On Monday and Tuesday, Aviva Investments, Standard Life and M&G Investments suspended redemptions from property funds worth a collective £9 billion ($11.5 billion), citing excessive withdrawal requests and insufficient liquidity.

Analysts have said moves by investors to pull money out could put downward pressure on commercial property prices.

A spokesman explained that fund managers had to act to manage property sales to repay investors wanting out of the market.

Pension schemes’ immediate reaction to the impact of Brexit uncertainty on property investment is said to be far more muted than retail investors, after four major funds halted trading.

Policymakers in Britain rushed yesterday to emphasise that the seize-up was confined to the sector of “open-ended” funds in property that normally allow investors to exit at will, and did not signal a liquidity problem in wider financial markets.

The Financial Stability Report points to pronounced foreign investment in United Kingdom property, accounting for about 45 per cent of the total value of transactions over the past seven years, and “stretched” valuations in some segments of the market.

The four Canada Life funds are: Canlife Property Life Fund, Canlife Property Pension Fund, Canlife UK Property Life Fund and Canlife UK Property Pension Fund. It added that the suspension would be reviewed at least once every 28 days, and would continue to be in effect till such time as the company deemed practical, it said.

M&G said suspending trading in the fund gave it time to raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values.

The asset manager suspended dealing on the £1.4bn Threadneedle UK Property Authorised Investment Fund and its feeder fund from today. “I’m not sure how they are going to sell these properties because you have got an issue where the more you’ve got coming to the market…it’s more and more hard to sell them”.

We have said on a number of occasions in the past that unit trusts and “open-ended” funds are not ideal vehicles for investing in illiquid investments such as physical property.

At 2.40pm, listed property developers share prices were showing the strain. But a surge of redemptions since the Brexit vote has them without enough cash on hand to pay out investors pulling out, since most of the fund’s money is tied up in British real estate.

The meeting comes as the Financial Conduct Authority’s new chief executive officer Andrew Bailey told reporters that while the fund suspensions were not a “panic measure”, the regulator “may need to look at the design” of property funds.