Ray of light for property as fund redemptions drop sharply in February

Overall, property funds saw outflows of £90m in February, with institutional property funds seeing outflows of £83m according to the Investment Management Association. The overall figure is down from a peak of £537m in December.

Outflows from private investor funds dropped tenfold in February, in a sign that many private investors feel the bottom of the market may have been reached.

December peak

The net outflows from private investor funds was £7m in February, compared to £77m in January. There has been a dramatic drop in outflows in the last three months, which peaked at £253m in November, and stood at £242m in December.

The slowdown in redemptions from private investor funds coincides with an upturn in performance, due to a slowdown in the precipitous fall in values. New Star Asset Management said the value of its property portfolio fell 0.3% in February, and that from April it was returning to monthly rather than fortnightly valuations because of less volatile market conditions.

Drop in confidence

There was a change in sentiment in the investment community in general in February, with investment funds seeing net sales of £811m across the months, compared to outflows of £721m in January.

However, recent events in the financial markets such as the collapse of Bear Stearns, and the resultant renewed uncertainty over the liquidity in financial markets may have led to a risk-averse investors withdrawing funds at greater levels in March.