SLI suspends UK Real Estate Fund

Standard Life Investments has suspended all trading in its UK Real Estate Fund following an increase in redemption requests.

SLI suspends UK Real Estate Fund


Effective from 12:00 on 4 July, a spokesperson for the firm said while the fund had been managing redemptions using its cash position, the increase in requests following the UK’s vote to leave the EU meant that they could no longer be met without selling assets.

In a statement, SLI said: “The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns from the range, mix and quality of assets within the portfolio.”  

“The selling process for real estate can be lengthy as the fund manager needs to offer assets for sale, find prospective buyers, secure the best price and complete the legal transaction. Unless this selling process is controlled, there is a risk that the fund manager will not achieve the best deal for investors in the fund, including those who intend to remain invested over the medium to long-term,” SLI added.

According to Nathan Sweeney, senior investment manager, Architas, while sentiment seems to have softened towards selected property assets in the last few days as the reality of Brexit has set in, SLI’s decision will likely cause more anxiety for investors.

But, he said: “While the return profile of property will likely be lower with rental increases slowing and demand likely to fall in some sectors, investors should be wary of discounting property completely and should carefully consider why they chose to hold it within their portfolios. It is still a lower volatility, potentially attractive income play in a low growth, low yield environment.”

For Adrian Lowcock, head of investing at AXA Wealth, the suspension “brings back to focus the issues with investing in open-ended commercial property funds. 

“During the financial crisis many investors were stuck in funds which had closed to redemptions as liquidity dried up.  However, while there is a short term issue with the asset class, I do not think this will lead to long term closure of property funds as it is driven by asset allocation decisions not by investors needing access to money.”

According to SLI, the suspension will end “as soon as practicable” and will be formally reviewed at least every 28 days.

Approval for the suspension was received from Citibank Europe plc, in its capacity as Depositary for the fund, it added.


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