‘Panic’ Brexit Withdrawals Halt Two More U.K. Property Funds
(Bloomberg) -- Henderson Global Investors and Columbia Threadneedle Investments suspended trading in at least 5.3 billion pounds ($6.9 billion) of property funds, taking the number of U.K. asset managers curbing redemptions to five in the wake of Britain's shock decision to leave the European Union.
“The problem with open-ended funds is you do start to have panic selling, so you really have no choice but to suspend the fund,” said Jason Hollands, managing director at investment firm Tilney Bestinvest. “There's an inevitability to this now.”
Henderson said Wednesday it had temporarily suspended its 3.9 billion-pound U.K. Property PAIF fund and feeder funds due to “exceptional liquidity pressures” and the recent suspension of other competitor's funds. Columbia Threadneedle has also halted its 1.39 billion-pound PAIF and feeder funds, according to a statement.
M&G Investments, Aviva Investors and Standard Life Investments have also halted withdrawals in their real estate funds. About 24.5 billion pounds is allocated to U.K. real estate funds, according to the Investment Association.
With the real estate tremors echoing the last financial crisis, the mounting fear is failure to control the aftershocks from the Brexit vote will propel the economy into recession. The pound sank to a fresh 31-year low as the fallout continued to reverberate through financial markets.
There's “a loss of confidence in the valuations being used” by fund managers, said John Forbes, an independent real estate consultant and former tax partner at PricewaterhouseCoopers LLP who specializes in property funds. “The retail funds had cash and balances in liquid shares” to manage normal levels of outflows, he said.
Industry commentators warn that London office values could fall by as much as 20 percent within three years of the country leaving the EU. During the financial crisis of 2007 and 2008, real estate funds were forced to freeze operations after withdrawals surged, contributing to a property-market slump that saw values drop more than 40 percent from their peak in the U.K.
--With assistance from Jack Sidders To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net. To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Michael Shanahan, Andrew Blackman
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