In part, they need to halt redemptions as investors rush for the exits because the funds don’t have sufficient liquid assets to sell to meet demands. Such assets can include cash and other liquid assets, such as holdings in real-estate investment trusts.
FN has looked at 10 of the largest unlisted UK funds ivesting in commercial property and examined their liquidity positions and whether they offer investors the opportunity to trade in and out of shares every day or once a month. Those funds allowing daily redemptions have less time to meet liquidity requirements.
The data was taken from the most recent fund documents. The firms declined to provide comment when contacted. The funds are:
• M&G Property Portfolio: AUM – £4.5bn; Offers daily liquidity (trading suspended)
• Henderson UK Property PAIF Feeder: AUM – £4bn; Offers daily liquidity
• Aberdeen UK Property PAIF: AUM – £3.4bn; Offers daily liquidity
• SLI UK Real Estate Retail (PAIF): AUM – £2.9bn; Offers daily liquidity (trading suspended)
• Legal & General UK Property: AUM – £2.4bn; Offers daily liquidity
• Aviva Investors Property Trust: AUM – £1.8bn; Offers daily liquidity (trading suspended)
• Threadneedle UK PAIF Retail: AUM – £1.3bn; Offers daily liquidity
• Kames Property Income: AUM – £0.5bn; Offers daily liquidity
• Royal London Property: AUM – £0.4bn; Offers monthly liquidity
• F&C UK Property: AUM – £0.3bn; Offers daily liquidity
It is rare for fund managers to impose such so-called gates on funds, however suspension of trading in shares for a temporary period gives an asset manager more time to sell assets to raise cash.
Andrew Bailey, the new head of the Financial Conduct Authority, said that that the suspension of trading is not a panic measure, but a way to deal with valuation adjustments, adding that the regulator is close touch with the fund managers.
The FCA also planned to meet UK asset managers on July 5 to analyse the impact of Brexit on the industry, a person familiar with the plans said.