The domino effect of property funds freezing up on the back of the coronavirus outbreak has hit Columbia Threadneedle and LGIM.
Not long after ASI and BMO announced their property funds would gate midday on Wednesday, Columbia Threadneedle released a statement saying it had blocked investors from buying and selling units in the Threadneedle UK Property Paif after its independent valuer CBRE deployed a ‘market uncertainty clause’ because it could not accurately value the fund’s assets.
LGIM followed closely behind with an announcement that its L&G UK Property fund and feeder funds had also suspended after its valuer Knight Frank triggered the same clause.
Both groups said their decisions had been driven by incoming regulation from the Financial Conduct Authority on illiquid assets in non-Ucits retail schemes.
LGIM stresses property fund’s ‘robust position’
An LGIM spokesperson stressed the suspension was a “temporary measure” brought about my “extreme conditions”.
They added the fund remains in a “robust position” with 24% held in cash and 2% in Reits as of 17 March 2020 and is “well positioned for the long term and for any structural changes in the UK property market”.
A factsheet for the Threadneedle UK Property Paif shows it had 14.3% in cash at the end of January. Around 32% of the fund was invested in industrials, while 29% was held in office buildings and 19.8% in retail warehouses.
Threadneedle property fund manager Gerry Frewin told shareholders in a statement: “Our objective is to protect the interests of investors in the fund, by always ensuring the fair treatment of all investors, whether they are transacting now or investing for the longer-term.
“While we appreciate this may cause some inconvenience, our decision to suspend dealing will prevent any investors being disadvantaged as a result of those redeeming from the fund or investing new money into the fund at an inaccurate price.
“Consistent with FCA guidance, we believe this is an appropriate measure to take to manage the fund during this period of exceptional uncertainty. We thank our investors for their patience and will continue to provide updates to keep them informed.”
£10.5bn trapped in property funds
The LGIM and Threadneedle suspensions bring the total number of property funds shuttered on Wednesday to five. Only one of the mega property funds, Royal London Property, has yet to update the market about whether it will join the raft of suspensions.
Kames Property Income and Janus Henderson UK Property suspended earlier this week.
The £2.3bn M&G Property Portfolio has been gated since December though this was blamed on Brexit and the fund’s high retail exposure.
Following the L&G UK Property fund and Threadneedle UK Property Paif suspending more than £10.5bn of assets are frozen due to coronavirus-driven volatility.
