Legal & General: firm’s UK Property Trust was among those to take a haircut on the value of their funds
Some £1.05 billion has been cut from the value of the UK open-ended commercial property funds, which collectively manage around £18 billion, as fund managers sought to ease liquidity constraints and meet investor redemptions.
Many of those making write-downs – although not all – were the funds that suspended trading in early July. Fund managers have said that these adjustments may not be final and are being reviewed.
The Legal & General UK Property Trust, which as of May 31 had £2.49 billion in assets, has taken a total haircut of about £270 million as a result of the 15% fair value adjustment made to the value of money invested in underlying property in the fund. L&G made a fair value adjustment of 5% on June 27 and added a further 10% on top of this on July 6.
Similarly, assets invested in property in the £3.2 billion Aberdeen UK Property fund have fallen in worth by some £224 million as a result of the 7% fair value reduction imposed on the fund, introduced in two stages on June 28 and July 6. Aberdeen, which lifted the trading suspension on its fund on July 13, is also operating a dilution adjustment of 17% for investors who want to withdraw their funds immediately.
Meanwhile, the M&G Property Portfolio fund, which had assets of £4.4 billion as of June 30, would have lost £198 million from its value due to its 4.5% fair value adjustment made on July 1.
Henderson Global Investors’ decision to reduce the value of the properties invested in its fund, which as of May 31 had assets of £3.9 billion, by 3.98% has resulted in a haircut of £162 million.
A spokesman for Kames said: “It has been virtually impossible to get any concrete property valuations since Brexit. The fair-value pricing adjustment is to ensure we treat all our customers fairly, not just those leaving the fund.”
The spate of suspensions led to a string of criticism over the structure of these funds, which largely offer daily liquidity despite investing in illiquid assets.
Laith Khalaf, a senior analyst at retail funds supermarket Hargreaves Lansdown, said: “In a situation like this [fund managers] have to make an adjustment to reflect the new level of demand they’re expecting yet they don’t know what that will be, so it’s a bit of an educated guess. That unfortunately is part and parcel of the structure of these funds and if you are an investor it’s one of the limitations you would have to accept.”
Laith added that when more concrete evidence of pricing being to filter through, the fair value adjustment could be revised further down, or even back up again.