Henderson Global Investors, Columbia Threadneedle Investments and Canada Life suspended trading in at least £5.7 billion ($7.8 billion) of property funds, taking the number of U.K. firms curbing redemptions to six following Britain’s shock decision to leave the European Union.
“The problem with open-ended funds is you do start to have panic selling, so you really have no choice but to suspend the fund,” said Jason Hollands, managing director at investment firm Tilney Bestinvest. “There’s an inevitability to this now.”
Henderson said Wednesday it had temporarily suspended its £3.9 billion U.K. Property PAIF fund, an institutional fund, along with feeder funds due to “exceptional liquidity pressures” and the recent suspension of other funds. Columbia Threadneedle halted its £1.39 billion PAIF and feeder funds, which offers both institutional and retail classes, and Canada Life froze four funds totaling £450 million.
With the real estate tremors echoing the last financial crisis, the growing fear is that failure to control aftershocks from the Brexit vote will propel the economy into recession. The pound sank to a fresh 31-year low as the fallout continued to reverberate through financial markets.
Investors pulled money from real estate funds in the lead-up to the vote, depleting cash levels, as industry commentators warned that London office values could fall by as much as 20% within three years of the country leaving the EU. Standard Life Investments was the first money manager to halt withdrawals Monday, followed by Aviva Investors and M&G Investments.
Wednesday’s suspensions take the total number of real estate assets frozen by money managers since Monday to at least £14.8 billion, according to the most recent data. About £24.5 billion is allocated to U.K. real estate funds, according to the Investment Association.
There’s “a loss of confidence in the valuations being used” by fund managers, said John Forbes, an independent real estate consultant and former tax partner at PricewaterhouseCoopers who specializes in property funds. “The retail funds had cash and balances in liquid shares” to manage normal levels of outflows, Mr. Forbes said.
