Managers suspend UK property funds as valuations plummet

Difficulties in accurately assessing assets leads to lock-ups

FILE PHOTO: The City of London financial district can be seen, whilst British stocks tumble as investors fear that the coronavirus outbreak could stall the global economy, in London, Britain, March 9 2020. REUTERS/Henry Nicholls/File Photo

The City of London financial district. Plunging asset values led to two managers of UK property funds to suspend withdrawals as valuations slide. Reuters. REUTERS/Henry Nicholls/File Photo

Reuters

Mar 18, 2020

Asset managers Kames Capital and Janus Henderson said on Tuesday they had temporarily suspended dealings in their UK property funds as market turbulence caused by the coronavirus made it hard to accurately value the properties they contain.

The lock-ups are among the first signs of stress in the funds industry amid the coronavirus pandemic. They follow the freezing of M&G's UK property funds in December on Brexit uncertainty and UK commercial retail property woes.

"The ongoing coronavirus crisis is a real concern for all of us," Stephen Jones, chief executive of Kames Capital, said in a letter to investors.

"At the same time, we have had to contend with a sharply lower oil price as well as the impact of the ongoing Brexit negotiations. These issues are affecting all areas of the stock market, including property investing."

LONDON, ENGLAND - MARCH 11: Rishi Sunak, Chancellor of the Exchequer departs to deliver the annual Budget at Downing Street on March 11, 2020 in London, England. The government is presenting its first budget amid the economic pressure of the coronavirus outbreak. Earlier today, the Bank of England announced an emergency interest-rate cut to boost economic activity. (Photo by Dan Kitwood/Getty Images)

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Kames said its regulator, the Financial Conduct Authority, has been notified.

The suspension of the Kames Property Income Fund and Kames Property Income Feeder funds came into effect on Monday, and was in agreement with the funds' Citibank Europe depositary, Kames said, adding it would update investors on the status of the fund every 28 days.

Janus Henderson said on its website it had temporarily suspended dealings in its Janus Henderson UK Property PAIF and Janus Henderson UK Property PAIF Feeder Fund with effect from Monday due to "material uncertainty" about the valuation of UK property.

The Bank of England and the FCA have said they want redemption terms for property funds that offer daily withdrawals, as the Kames and Janus Henderson funds do, to better reflect the long time it can take to sell real estate assets in the fund to raise cash.

Many property funds were suspended in the immediate aftermath of Britain's vote in June 2016 to leave the European Union.

"Others are probably lining up to go now", said one investment industry source.

Aviva Investors, Canada Life, Colombia Threadneedle, Legal & General and Standard Life Aberdeen also run UK property funds with daily redemptions.

The fund managers did not immediately respond to request for comment.