More Brexit worries over property
Three more funds halt trading as investors panic
Henderson, Columbia Threadneedle and Canada Life halted trading in funds overseeing £14 billion of investments in offices, shopping centres and industrial units.
The announcements came after Standard Life, Aviva and Prudential-owned M&G locked out investors from withdrawing their cash earlier in the week.
It means half of all UK retail property funds are now suspended, with more likely to follow.
Investors in Aberdeen’s UK property funds will face a 17% exit fee. The asset manager confirmed it had one of the highest levels of liquidity compared to similar funds and had sold all quoted property investments in the week prior to the UK’s vote to leave the European Union.
Martin Gilbert (right), chief executive at Aberdeen Asset Management, said: “Our focus has been, and continues to be, treating all customers fairly. We have worked hard to deliver realistic options to clients: redeem at a price which reflects the relatively penal impact of short term trading in the property market, or remain in the fund, protected by the anti-dilutive measures we are taking, and look through to the longer term fair value which we expect to be available in less pressured markets.
“Reducing the share price of the Fund reflects the changing market conditions over the past week or so and uncertainty around prices in the property market; sellers requiring liquidity are having to market properties at sometimes significant discounts to their recent valuations.
“Aberdeen’s property fund continues to hold a good level of cash, which permits us to offer these options to investors, but it is imperative that we protect remaining holders by fairly reflecting the impact of short term trading on values provided to redeeming shareholders.
“The property market itself may take some time to find its level but we believe that the same factors that made property a good long-term investment yesterday remain true today.”
Commercial property has enjoyed a 40% rise since the financial crash but there were warnings in the Bank of England’s financial stability report, published yesterday, that foreign investments into UK property are down by half.
The property crisis came after the pound slumped to a 31 year low and shares in London also fell.
The pound fell plummeted to $1.2796 against $1.50 when the EU referendum polls closed on 23 June. There are predictions it will fall to $1.20 as GDP forecasts are cut and an interest rate cut may soon follow.
The FTSE 100 index, which last week recovered all the previous week’s losses, fell for a second consecutive session, down 1.5% to close at 6463.6.
Fears of a price war sent shares in supermarkets lower. Banks also fell as analysts identified them as having the greatest exposure to the property sector. RBS and Lloyds are said to have £19bn and £13bn of commercial property loans respectively.
A more accurate, and more worrying reflection of sentiment is the 10% fall in the FTSE 250 index of mid-sized companies since the referendum result.
In the search for safety, investors have opted for government bonds, pushing down yields, and gold, which hit a 27-month high at $1.371.
However, there was some calm on overseas markets. Wall Street stocks rose on Wednesday afternoon as officials sought to reassure investors of limited impact from the Brexit vote.
Federal Reserve Governor Daniel Tarullo said world financial markets are well prepared for it and German Chancellor Angela Merkel said the vote would have limited impact on the country’s economy.
Some further positive news came from Amazon which said it would go ahead with plans to create 1,000 jobs in Edinburgh, London, Cambridge, Manchester and Leicestershire.
The firm also said it was not changing any plans as a result of Brexit.
Doug Carr, head of Amazon UK, said: “Our sales are in line with expectations. It’s business as usual as far as we are concerned.”