Aberdeen and Aviva’s multi-asset funds have investments trapped in the groups’ suspended property funds
Financial News analysis shows that in the lead-up to the investor run on the real estate vehicles, multi-asset and multi-manager funds run by Aberdeen Asset Management, Aviva Investors, M&G Investments, Legal & General Investment Management, Columbia Threadneedle Investments and Baring Asset Management had exposure to the troubled sector.
Some managers, however, were able to redeem their money ahead of the funds being shuttered – notably Baring Asset Management was able to withdraw almost £100 million in assets – although others have been forced to wait until trading resumes which, in most cases, is for an unknown period of time.
In the week ending July 8, almost three-quarters of the £25 billion open-ended commercial property sector was forced to cancel trading as these fund vehicles, which invest directly in bricks and mortar, struggled to meet widespread investor redemptions.
Laith Khalaf, a senior analyst at retail funds supermarket Hargreaves Lansdown, said the suspensions would hit the prices of multi-asset funds, but not by much. They are unlikely to experience liquidity problems of their own, he added, as the property fund stakes represent small portions of their overall portfolios. He said: “It’s a ripple, but not an earthquake.”
In a statement on July 8, Alan Miller, the founder of wealth manager SCM Private, said fund managers should compensate investors trapped in the funds to the tune of £140 million. Miller was investment chief at New Star Asset Management until 2007, the year before it was forced to suspend trading in its International Property Fund.
He argued managers’ downward price adjustments following the vote were insufficient, when compared with falls in the shares of listed property companies, and this meant investors that sold out before the suspensions had exited at “materially inflated prices”.
The Financial Conduct Authority issued guidance for property fund managers on July 8, stating that when handling a high volume of redemption requests, managers should ensure “disposals are carried out in a way that does not disadvantage investors who remain in the fund or are newly investing in it”.
Among those to exit were L&G’s £369 million multi-manager funds, which sold out of the vast majority of their holdings in Henderson‘s UK property fund – which at £22 million, had been their largest single investment – during June, a spokeswoman said.
Another fast mover was Columbia Threadneedle. Its pair of multi-asset funds, managed by Toby Nangle, had stakes in Threadneedle’s UK property fund. But these were sold down almost to nothing after the referendum but before trading in the property fund was suspended on July 6, according to a person familiar with the funds.
In contrast, a spokesman for Aberdeen Asset Management confirmed that about £10 million of its £190 million diversified growth fund, managed by Mike Brooks, was locked in the Aberdeen UK Property Fund, which suspended trading on July 6, intending to reopen on July 11.
Meanwhile, a spokesman for Aviva Investors said 3.8% of its £73 million Multi-Asset Fund 1 has been trapped in its Aviva Investors Property Trust, which suspended trading indefinitely on July 4.
According to their latest fund factsheets, dated May 31, M&G’s £431 million Episode Income and £335 million Episode Allocation funds had a total exposure of almost £50 million to its M&G Property Portfolio Fund, which was suspended on July 4. A statement from M&G said: “Our holdings will be treated as any other investor – we will not be able to sell the asset until the suspension is lifted.”
Baring was, however, able to avoid being gated in the Henderson property fund despite its flagship £1.7 billion Dynamic Asset Allocation fund and its £165 million multi-asset fund having exposures of 4% and 10.6% respectively at the end of May. A spokeswoman for the firm said these allocations were redeemed ahead of the fund’s suspension on July 5.
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