Monday 7 November 2016

Property Fund Suspensions Lifted

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An increase in negative sentiment towards the UK commercial property sector following the UK Brexit vote placed tremendous pressure on the cash liquidity buffers held within property funds. Unlike with other funds the sale of commercial property can take considerable time and, in the current market, the value of property is more volatile and difficult to accurately determine, so to manage their funds effectively, fund managers needed to take action. This resulted in five property funds suspending dealing: Aviva Property Trust; Henderson UI Property PAIF; M&G Feeder of Property Portfolio; Standard Life UK Real Estate and Columbia Threadneedle UK Property Trust, while others introduced pricing adjustments. While the funds were suspended investors could not buy, sell, transfer or switch units, but the investments held within the funds were safe as the fund managers aimed to protect the interests of existing investors.

The good news is that all but one of the UK commercial property funds that suspended dealing due to a significant increase in investors withdrawing their money following the Brexit vote have reopened for investment. Aviva Investors remains suspended however, saying in August that its fund would remain suspended for six to eight months. In a press release Aviva say that "we are committed to ensuring the trust has a sustainable liquidity position before we allow dealing to resume in order to protect the interests of all investors". 

There is reason to be optimistic since the fundamentals that underpin the popularity of property as an asset class remain in place and many analysts believe that property still has a place within a well-balanced portfolio. Although there is still uncertainty in regard to the property sector, investors should not let short-term volatility impact their long term investment goals The best thing to do if you are at all concerned is to seek the advice of your financial adviser, who will be able to advise you on the best investment strategy based on your individual circumstances.



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