Throughout last week a number of open-ended property funds announced the they were suspending investors from withdrawing and putting their money in. Some funds have not done this but have rebased their pricing so that investors coming out face a financial penalty.
Aberdeen UK Property Fund (GB00BTLX1G31) and Aberdeen UK Property Feeder Unit Trust (GB00BTLX1Q39) suspended withdrawls but only for a short period between 6 and 13 July. Investors can now withdraw their money subject to a price diluted by 17 per cent that Aberdeen says "reflects the current market environment and the fact that short-term sales in the property market have relatively penal consequences."
State of open-ended property funds
Fund | Suspended Trading | Trading On a Fair Value Adjustment? | Bid basis | Last Valuation Point | Other Notes |
Aberdeen UK Property | No - suspension lifted on 13/7/16 | Yes - 7% | Yes | 13-Jul | Deals placed for 6/7 valuation point (VP) will be dealt at 13/7 VP with a 17% dilution adjustment, unless clients want to cancel. Orders placed during suspension period have been rejected. This is c.16.4% below the previous days price. |
Aviva Investment Property Trust | Yes | 04-Jul | |||
Canada Life | NA | NA | NA | NA | |
F&C UK Property | No | Yes - 5% | Yes | ||
Henderson UK Property Trust PAIF | Yes | Yes - 5% of value of properties (3.98% of fund when taken into account) | Yes | 05-Jul | |
Kames Property | No | Yes - 10% of value of properties (8.51% of fund when taken into account) | |||
M&G Property Portfolio PAIF | Yes | Yes - 4.5% | Yes | 04-Jul | |
Standard Life UK Real Estate | Yes | Yes - 5% | Yes | 04-Jul | |
Legal & General UK Property Trust PAIF | No | Yes - 15% | 5% bid/offer spread removed | ||
Threadneedle UK Property Trust PAIF | Yes | No | Yes | 06-Jul |
Source: Hargreaves Lansdown as of 13 July 2016
However, even if you are in a fund which has not suspended withdrawls, advisers largely suggest that you stick with it.
Darius McDermott, managing director of Chelsea Financial Services, says investors in property funds that have not suspended trading "should be aware that there may be very high exit charges for [selling out], as most physical property funds have already had fair value adjustments and moved from offer to bid pricing. I would emphasise that long-term investors in the asset class, who would otherwise not change their investments, should not be panicked into making a move. Property is still a good diversifier in an overall portfolio and yields on these funds may also increase, which will be a positive for income investors."
Tim Cockerill, investment director at wealth manager Rowan Dartington, adds that: "If you are invested in commercial property you did this as a long-term investment. You are still getting income, these typically invest in buildings with long-term high quality tenants, and you are invested in high quality assets managed by professionals. If you hold it as part of a long-term portfolio then sit there."
And Danny Cox, chartered financial planner at Hargreaves Lansdown, points out that even if there is a large fair value adjustment in the coming months, five years down the line you might still be sitting on a profit. He also thinks that if you can't get out at an acceptable price then you should sit tight.