Some of the UK’s biggest property funds for retail investors have been running down their cash levels in the face of outflows.
Yesterday, M&G suspended trading in the M&G Property Portfolio fund because its cash levels had dwindled in the face of “unusually high outflows”. The fund had been running with 17.5% cash in May but this fell to just 5% at the end of October.
Other big funds have also seen their cash levels fall. The percentage of the Threadneedle UK Property Fund held in cash has fallen from 11.8% in June to 6.7% in September as the size of the fund has reduced from £1.5bn to £1.3bn.
Meanwhile, cash levels in the Janus Henderson UK Property PAIF have fallen from 24.6% in June to 16.7% in October and the Aberdeen UK Property Fund’s cash levels have reduced from 18% to 11.5% over the same period. Both funds have seen significant outflows in recent months.
Smaller funds have also been hit. Kames Property Income’s cash level has fallen from 18.6% in June to 8.6% in October. However, it has since boosted cash levels to 15% following a number of disposals.
Property fund net outflows in 2019
Source: Investment Association
The one notable exception is the Aviva Investors UK Property Fund. Even though the size of the fund fell over the summer months, its cash level has ballooned from 17.4% in July to over 30% thanks to the disposal of assets. The fund manager sold Forum St Paul’s in the City to investment manager Goldstone Commercial, which is backed by Hong Kong capital, for £80.75m in September following a successful run of lettings.
Data from the Investment Association shows that property funds have seen steady outflows since last December. It estimates that net outflows over the past year total more than £1bn.
Estimates from funds transaction network Calastone are even starker. It said yesterday that outflows from real estate funds had reached £2.5bn since October 2018, with £251m leaving the sector in November alone.
“Real-estate funds keep breaking new records for all the wrong reasons as capital continues to leave the open-ended sector,” said Edward Glyn, head of global markets at Calastone.