Almost £5bn of customer assets are now locked in suspended property funds. With all open-ended property funds likely to suspend in the short-term.
Ryan Hughes, head of active portfolios at AJ Bell, comments: “The suspension of the Kames Property Income fund has been swiftly followed by the Janus Henderson UK Property fund also suspending on the basis of material uncertainty over the valuation of UK commercial property. With independent valuers finding it impossible to accurately value property given the major economic uncertainty, there is little choice but to suspend dealing.
“In 2019, the FCA announced new rules forcing the suspension of a fund where there was material uncertainty over pricing of at least 20% of the assets. Despite these rules not being due to come into force until September 2020, they have effectively been adopted by asset managers in the face of such major economic turmoil. With two of the largest independent valuers saying they cannot accurately determine the value of property, it’s almost certain that all open-ended property funds will now have to suspend dealing.
“Investors will understandably find these closures distressing at such an uncertain time in markets. However, there’s nothing they can do now but wait it out and hope that the suspensions don’t drag on for too long. The length of the M&G closure highlights that it’s not a quick task to offload large property assets in order to generate cash, and current market conditions will only make that harder.
“With the FCA continuing to look at the appropriateness of illiquid assets in daily traded funds, surely this must spell the end of such structures to avoid damaging the confidence of investors in the funds industry.”