Suspension of UK Commercial Property Funds
After the UK cast its vote to leave the European Union there was a significant amount of investment that was pulled from commercial property funds over fears the exit would cause property values to plummet. This caused a number of well-known investment companies to suspend their commercial property funds in order to prevent mass withdrawal of cash and cause cash-flow problems for the funds..
The Threadneedle Property fund re-opened for business a week ago and Henderson UK’s Property Fund has announced it will re-open in October. Further funds such as the Aberdeen UK Property Fund, F&C UK Property Fund and Legal & General UK Property Trust have all lifted their dealing freeze this month.
Despite this there is still £9 billion in suspended commercial property funds with the likes of Aviva Investment Property Trust, M&G Property Portfolio PAIF and the Standard Life UK Real Estate Fund remaining gated.
M&G and Standard Life have announced plans to reopen the funds at the end of the year, however it is expected that Aviva may not reopen for another six months.
Although a significant proportion of the sector is on ice, the fund freeze experienced after the Brexit vote is beginning to thaw with funds reopening and increasing their liquidity buffer.
This is a positive step for the industry, however, there are still issues surrounding its liquidity. As a result property fund managers are storing significant proportions of investments in cash, meaning this percentage will mean much lower returns for investors.