Property fund outflows reduced significantly last month, fuelled by freedom-day optimism among investors, according to data from Calastone.
In July investors sold down £94m in real estate funds, the best figure since April, as lockdown restrictions eased.
The global funds network said the improvement was down to “reduced selling activity” and “renewed interest from buyers” as gross purchasing climbed to £142m, the highest figure since February 2020.
This followed severe outflows of £414m and £249m in May and June respectively, as investor confidence was rocked by a spike in coronavirus Delta variant cases, Calastone said.
See also: Property fund redemptions hold steady as another £186m heads out the door
£94m redemptions a ‘standout’ month for the sector
The commercial real estate sector has been disproportionately hit by the pandemic with all the major UK property funds forced to close last year after it became impossible to value their underlying holdings.
According to Calastone, outflows in property funds have, every month since autumn, averaged £267m, making July a stand out month for the sector.
“Property funds have suffered outflows every month for almost three years. There is significant oversupply in some segments of commercial property that will take some time to work through and this has meant continued, sustained selling pressure from investors,” said Edward Glyn, head of global markets at Calastone.
“There are real bright spots though,” Glyn continued. “Industrial premises are in high demand as manufacturers get back to work and logistics operations thrive.
“We even saw a couple of days of net inflows in the fortnight following Freedom Day, having seen nothing but outflows every day this year.”
Open-ended and closed-ended property funds dominated last month’s top performers as investors tried to hedge against inflation.
The £52.59m Gravis UK Listed Property fund came out on top, rising 8.19% over the month, according to data from FE Fundinfo.
See also: ‘Esoteric’ property funds top performers in July
ESG assets continue to surge
Meanwhile, ESG funds saw their second-best month on record in July, according to Calastone’s data, which reports inflows reached £995m, accounting for 90% of total inflows for the month.
Though net inflows into equity fell to £1.12bn, half the average figure over the last six months, passive index funds suffered the most, as investor demand for ESG equity products drove active investment. More than nine tenths of the ESG capital recorded during the period flowed into active equity funds.
Calastone said ESG equity funds with more targeted geographical of sector focuses have begun taking a greater share of new inflows.
