Henderson Global Investors and Columbia Threadneedle suspended all trading in their property funds, becoming the fourth and fifth firms to do so as investors flee for the exits in the wake of the UK’s vote to leave the European Union.
The move follows the decision of M&G to suspend its £4.4 billion ($US5.3 billion, $A6 billion) fund late on Tuesday, and other investment groups Standard Life and Aviva.
Trading has been suspended because the fund managers cannot liquidate, or sell-off, the underlying assets fast enough to meet investors demand for their cash back.
Here’s the statement from Henderson:
“Despite a strong underlying portfolio, the decision was taken due to exceptional liquidity pressures on the funds, as a result of uncertainty following the EU Referendum and the recent suspension of other direct property funds.”
“The £3.9 billion Henderson UK Property PAIF has delivered to investors in line with its investments objectives. The portfolio remains well positioned in core properties with high quality tenants, with the managers continuing to focus on delivering an attractive income stream.”
And here’s Columbia:
“We have not been immune to the recent trend of retail outflows from the sector and so far these requests have been met from the cash balance retained within the Threadneedle PAIF. However, it is expected that these requests to sell will continue for the time being due to uncertainty in the market following the UK Referendum result, therefore the temporary suspension of dealings allows sufficient time for the orderly sale of assets, and protects the interests of all investors.”
It means more than £13 billion of UK property investments have now been locked in, as investors scramble at the same time to pull out cash out in the wake of the Brexit vote.
Jefferies warned in a note on Tuesday that: “2016 is shaping up to be a rerun of 2007, with real estate open-ended funds having switched from monthly to weekly valuations and cut pricing by -5% last week given the uncertainty of real estate valuation since the Brexit vote.”
Shares in property companies and banks have taken a big hit since the June referendum.
Here’s the chart of Barratt Developments:
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