BMO Gam and Aberdeen Standard Investments have become the latest managers forced to freeze their property funds because of independent valuation issues arising from the coronavirus outbreak.
At midday Wednesday, ASI said it had suspended dealing in the £1.7bn Standard Life Investments UK Real Estate Fund and £1.1bn Aberdeen UK Property Fund because of extreme difficulty in accurately valuing assets in the current environment.
Not long after, BMO Gam confirmed it had made a double suspension with both the BMO UK Property and the BMO Property Growth & Income funds suspending along with their feeder funds. The latter fund only has 24.7% in direct property, according to Trustnet.
BMO Gam emphasised the suspensions were not related to liquidity. Instead, it said the suspension was consistent with the Financial Conduct Authority’s recent policy statement that funds should suspend trading of units if material uncertainty is applied to more than 20% of a fund’s immovable assets.
Suspension of the quartet of funds follows similar announcements in relation to the Kames Property Income fund, Janus Henderson UK Property Paif and the Aviva Investors UK Property fund.
‘Not currently possible to provide accurate and reliable valuations’
An Aberdeen Standard Investments spokesperson said: “Following the introduction of ‘material uncertainty’ clauses into valuations by UK property fund industry valuers, we have suspended dealing in our two open-ended UK property funds and their feeder funds.
“Markets around the world have experienced huge disruption as Covid-19 spreads and trading in the UK property market is being severely impacted. As a result the funds’ independent valuers have informed us it is not currently possible to provide accurate and reliable valuations for certain assets, including the properties held in the funds. We are therefore unable to produce a price for the funds which we can say with any confidence reflects the true value of the assets.”
ASI said the action reflected “exceptional circumstances in global markets” including UK property as Covid-19 spreads and the need to protect client interests when there is uncertainty over how the assets should be valued.
The spokesperson added: “We will aim to lift the suspension as soon as confidence returns to the market and there is more certainty regarding asset valuations, taking into account the best interests of customers and investors.”
More than £8bn of property fund assets now frozen
The decisions from BMO Gam and ASI to freeze funds takes the total assets under management in suspended assets in the Investment Association UK Direct Property sector to £8.6bn, according to AJ Bell. The BMO Property Growth & Income fund sits in the IA UK Property Other sector.
Head of active portfolios Ryan Hughes said suspensions were inevitable with pricing uncertainty in the commercial property market.
He added: “This is done to protect existing investors and stop investors who wish to sell redeeming at an artificially high price. So, while this will be hugely disconcerting for investors who are trapped in these funds, it’s important to remember the underlying reasons for asset managers making this move.
“Now is a time to be patient and over time, it is expected that equities, bonds and property valuations will settle and allow a normal market to function again.”
It comes as Square Mile said it has suspended its recommend rating on the Janus Henderson UK Property Paif following its trading suspension.
“We will continue to monitor the fund while it remains in this suspension period,” it said.
