Leading UK property funds gate amid coronavirus woes

Aviva Investors’ UK Property fund, Colombia Threadneedle Investments’ UK Property Authorised Investment Fund, Janus Henderson’s UK Property fund, Standard Life’s two property funds, BMO Global Asset Management’s UK property fund and Kames Capital’s Property Income fund had all been gated as Property Week went to press.

All blamed the coronavirus-caused market volatility for the closures, and said valuers had advised correctly valuing underlying assets was currently impossible. Global markets have been fluctuating wildly, and the FTSE 100 tumbled 11% in the week ending Tuesday 17 March, down to the lowest level seen since 2011.

In a note to investors, Kames Capital said it believed “the current market turmoil makes it difficult to provide a true value for the funds underlying assets”. The firm’s fund owns a number of warehouses, office buildings and high street retail outlets. It will review the suspension in 28 days along with Colombia Threadneedle, which said: “The suspension of the Threadneedle fund is consistent with the FCA’s upcoming rules which require a fund to suspend if more than 20% of its assets cannot be accurately valued.”

A spokesperson from Aviva Investors said that it had been advised by its independent valuer that there is currently ‘material valuation uncertainty’ for all property assets within the portfolio. “If we allow dealing to continue some investors may be advantaged at the expense of others,” the spokesperson said.

Edward Glyn, head of global markets at global funds network Calastone, outlined how the market uncertainty would see fund managers faced with a sudden increase in cash demands from investors. This, he said, would lead to forced building sales, but buyers will be on strike until there’s clarity about what lies ahead.

“To protect investors, it’s therefore entirely right that funds suspend trading,” he said. “Property is a long-term investment and investors must accept that illiquid real estate is not an ATM. When conditions begin to normalise again, those who still wish to withdraw cash will be able to do so as fund managers become able to liquidate assets at reasonable prices.”