Several of the UK’s leading commercial property funds were suspended in the wake of Brexit, leaving investors unable to access their money. However, it has recently emerged that some will be fully operational again in October 2016. So, which UK funds have decided to resume trading and does this suggest the market is stabilising?
Mass closures in July 2016
Following the EU referendum, investors began to lose confidence after seeing sterling fall to a 31-year low against the US dollar. Two weeks following the referendum, the FTSE 250 index of UK companies declined by 10%, adding to the uncertainty.
A reported £35 billion was tied up when many of the UK’s commercial property funds halted trading in July 2016, after experiencing a surge in investors requesting their money back. Among the first to act were Aviva, Columbia Threadneedle, Henderson and Standard Life, with half of all UK commercial funds suspended by 7 July 2016.
Standard Life says market is stable
Standard Life was one of the first funds to suspend trading, but recently announced it will reopen on 17 October 2016. When the fund closed on 4 July 2016, Standard Life said it had received an “unprecedented level of redemptions” from investors.
Since July, the firm has sold some of the £269 billion worth of assets it manages in order to raise enough money to repay investors who want out, allowing the suspension to end. Further, Standard Life believes “the commercial real estate market has stabilised” –a claim that's supported by the reopening of other funds.
Columbia Threadneedle resumed trading on 26 September 2016 and Henderson will do the same in October 2016. Others will remain closed or else operate with value adjustments, which involves the intentional lowering of property values to shrink investors’ money.
UK commercial property funds oversee billions of pounds of investment in apartments, offices and retail units across the country. So, the fact that leading funds are reopening is a positive sign for the market.
Nevertheless, Brexit did underline the importance of being solvent and able to respond to any sudden changes. For this reason, property managers can turn to ethical Enforcement Agents if they need help recovering commercial rent arrears.