More property funds reopen, but other investors left in limbo

Seven months after barring investors from accessing their cash, funds are starting to re-open, but some will remain shuttered until the first quarter of 2021. 

Aberdeen Standard Investments (ASI) will reopen its £1.6 billion Standard Life Investments UK Real Estate fund and £900 million Aberdeen UK Property fund in mid-November. 

The portfolios, along with the entire fund open-ended commercial property fund sector, were suspended in March after independent valuers declared a state of “material valuation uncertainty”, meaning they could not accurately value the underlying property assets as Covid-19 wrought havoc on asset prices. This clause was removed at the end of September, prompting ASI to begin the process of reopening the funds. 

Fund manager George Shaw recognised the inconvenience to investors of the suspension, but said the group had been focused on treating all investors fairly.

“We are delighted to announce our plans to resume dealing in the two funds from 16 November. We recognise that the dealing suspension will have been inconvenient to investors, however, the decision was made to ensure the fair treatment of all clients and customers. Despite the market disruption due to the Covid–19 pandemic, we still consider UK commercial property has a role to play in a diversified portfolio for the longer-term investor.”

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 However, while some open-ended property funds have begun to reopen, others remain suspended. 

In June, BMO Property Growth & Income, a portfolio with lower exposure to physical property assets than many of its competitors, became the first property fund to reopen, although the group’s BMO UK Property fund remains shuttered.

Legal & General reopened its £2.9 billion L&G UK Property and UK Property feeder funds on 13 October, seven months after it suspended dealing. The group said it was satisfied that valuations were accurate and reflective of the market for transactions. Quilter Cheviot’s equity research analyst Oliver Creasey explained that the fund was one of the better capitalised ones in the space, with around 27% in cash or shares, and had a better-quality property portfolio. In contrast, he noted that Kames Capital’s Aegon Property Income fund had a cash balance of just 7% at the end of July, giving it less room to manoeuvre. 

Columbia Threadneedle lifted the dealing suspension on its Threadneedle UK Property Authorised Investment Fund (PAIF), along with its feeder fund the Threadneedle UK Property Authorised Trust, in September. Royal London Asset Management reopened its property funds on 30 September. 

Janus Henderson has said that it may not lift the dealing suspension on its £1.8 billion UK Property PAIF until the first quarter of next year, pointing to Brexit uncertainty and challenging market conditions. 

Kames Capital (Aegon), Aviva and M&G have yet to make the move to reopen their suspended funds, leaving investors in limbo a while longer.

The Financial Conduct Authority is currently consulting on the possibility of introducing notice periods of up to 180 days on open-ended property funds. The consultation closes on 3 November, with a policy statement and final rules expected to follow in 2021.

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