Janus Henderson pledges to keep 15% cash weighting as it reopens property fund

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27 January 2021

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Janus Henderson is reopening its UK Property Paif and feeder fund next month almost one year since it was forced to suspend dealing following the outbreak of the Covid pandemic.

In a statement on Wednesday, the firm said the fund would end the suspension at midday on 24 February.

Dealing in the fund was suspended on 16 March after its independent valuer CBRE advised on ‘material uncertainty’ around the value of UK properties because of Covid. It was frozen around the same time as a raft of other open-ended property funds, which all shuttered for similar reasons.

Janus Henderson said the suspension has “allowed for an orderly sale of properties to raise the portfolio’s cash to a level that is sufficient to cover known client redemptions”. At the end of December, the fund had 27.1% in cash.

Fund to keep cash levels at 15%

The update added the intention is to maintain a cash weighting in excess of 15% but that would fluctuate depending on subscription and redemption levels and property transactions.

During the period of suspension, 11 assets have been sold with most sale prices exceeding 31 December 2019 valuations, Janus Henderson said.

Portfolio manager Ainslie McLennan (pictured) said rent collection remained strong in 2020 with 91.5% of rents due collected by 18 January this year.

“The investment objective of the fund remains focused on holding a strong portfolio of defensive, core assets with a mix of robust tenants on long leases across all sectors,” McLennan added.

The Threadneedle UK Property Paif was the first suspended fund in the sector to reopen to redemptions, when it did so on 17 September.

The L&G UK Property fund, the largest in the sector, lifted its seven-month suspension on 13 October and has since seen about £560m flow out.

Redemptions anticipated

Fairview Investing consultant Ben Yearsley said if the experience of L&G is anything to go by, then the Janus Henderson fund might have to close soon after reopening if it wants to keep a minimum of 15% in cash. “Don’t forget, L&G lost almost 20% of the fund,” he said.

Standard Life Investments UK Real Estate and Aberdeen UK Property funds reopened on 16 November, but Aegon Property Income and the M&G Property Portfolio remain shut.

Earlier this month, the authorised corporate director for the M&G Property Portfolio announced the fund was remaining shut to protect investors, despite its cash position reaching 21%. It anticipates the cash position will rise to 27.5% once all outstanding transactions have completed.

Yearsley said open-ended physical property funds are structurally challenged.

“We have had two periods of suspensions in the last five years and the sector/industry can’t do another one,” he said. “The response to the 2016 lockdown seemed to be to increase the cash weight, while charging the same fee. Unacceptable in my view as investors have been paying full price for only 80% of the fund being invested in property.”

M&G said in its latest update it will not charge fees on cash held in excess of 20% while the fund is in suspension.

Yearsley added: “Going forward, unless the FCA brings in notice periods I think physical property funds have to change to hybrid models of part physical and part property shares – a fund such as BMO Property Growth & Income is the only example of this today.”