Aberdeen Standard Investments’ UK real estate business was hit by £1.4bn of net outflows in 2019 as investors pulled money out of several of its flagship funds.
The fund manager experienced gross inflows of £0.9bn to UK real estate vehicles but these were far exceeded by redemptions totalling £2.3bn, according to annual results published this week.
As a result of the outflows, its UK real estate assets under management (AUM) fell to £13.4bn.
In continental Europe, which accounts for the bulk of the rest of ASI’s real estate AUM, the manager had a more positive year. Gross inflows of £1.6bn comfortably exceeded redemptions of £0.8bn, but AUM still fell by £0.1bn to £12.1bn due to a downturn in performance.
Investment performance across the real estate business was hit by the declining fortunes of the retail property sector last year.
Just 39% of real estate AUM performed ahead of benchmark, down from 71% in 2018. Over three and five years, 48% of AUM and 36% of AUM respectively are ahead of benchmark.
Outflows from Aberdeen Standard’s two funds for retail investors – Aberdeen UK Property Fund and Standard Life Investments UK Real Estate Fund – were a contributing factor behind the UK redemptions in 2019.
Most funds for retail investors suffered high levels of redemptions in 2019 as concerns about the outlook for retail property and the gating of the M&G Property Portfolio fund at the end of the year hit confidence.
The Aberdeen UK Property Fund, which has a particularly high exposure to retail, saw net outflows of £180m in December alone.
The fund manager’s flagship £2.7bn fund for institutional investors, Standard Life Investments Pooled Pension Fund, also suffered redemptions, albeit not on the scale of the outflows from the retail investor funds.
The fund, which has been looking to reduce its retail exposure, was the second weakest performer in the AREF/MSCI UK Quarterly Property Index in 2019, reporting total returns of -1.4%.
Neil Slater, ASI’s new head of global real estate, who took over from co-heads David Paine and Pertti Vanhanen last year, has pledged to review the manager’s investment strategy.
“We need to ensure that we’re well placed for the future and this may mean adding resources to strengthen further areas of the business, such as in Asia or our residential capability,” Slater told The Times in December last year.