Standard Life Investments to Reopen Property Fund for Withdrawals Next Month



Posted on: 11th October 2016

Standard Life Investments has announced that it is once again to open its £32.5 billion property fund in October, having made the decision to suspend withdrawals on the back of the Brexit vote. As concerns regarding property values mounted following the vote to leave the European Union, withdrawals were indefinitely suspended and investors were cut off from the fund.

Now though, the Scottish investment group has stated that the fund will once again be open to investors, as of October 17. According to the statement released by the group earlier this week, the decision was made due to strong indications that the “commercial real estate market has stabilised”.

As the first fund manager to put a block on investors accessing its property fund, Standard Life is said to have created a ripple effect that would eventually see Aviva Investors, M&G and five other fund companies doing the same. They were not, however, the first company to reverse the decision to suspend withdrawals, with Columbia Threadneedle, Canada Life, Henderson and Aberdeen having already done so, or narrowed things down to an exact date.

Aviva Investors will for the time being continue to disallow investors from pulling money from their £1.5 billion property fund, having indicated that this would not change until next year. In addition, the UK’s largest property fund – M&G’s £4 billion fund – is for the time being closed to investors for withdrawals, with no specific indication yet of when this is likely to change.

The suspension of the property funds prompted important questions as to the reliability of these kinds of investments in general.

It was announced in July by the Financial Conduct Authority that an investigation would be carried out into how suitable or otherwise such structures are, as part of a wider assessment of how the vote to leave the EU affected asset management businesses. One of the subjects under discussion is that of how mass withdrawals should be handled in the future.

“If there is to be a formal review, it would make sense for this to happen only once all funds have reopened, and market value adjustments and valuation caveats have been removed. This would provide a sound basis on which to assess managers’ actions and the results for investors,” said Standard Life Investments head of real estate, David Paine.

“We will contribute to any potential review since it is sensible one should be undertaken, in doing so we would encourage the industry to seek to maintain choice for investors.”

Generally speaking, property prices have not been affected particularly severely in the wake of the Brexit vote. Unlike Aberdeen, which immediately began offering discounts of up to 15% following the vote to trigger rapid sales, most haven’t taken things to such extremes. Prices for the most part haven’t fallen as steeply as investors predicted.

From the moment the vote took place to the close of August, the average price of commercial properties in the UK fell by around 5%.

“A moderate cyclical cooling was already under way in the UK and it is truly remarkable that the referendum has not had a greater impact so far,” said Colliers director of research, Walter Boettcher.

In addition, Hargreaves Lansdown analyst Laith Khalaf has warned that when many of the funds reopen, it’s highly likely that lower returns can be expected.

“The UK property fund sector appears to be returning to some semblance of normality, though there are still some big funds out there that are yet to open their gates,”

“The big freeze that beset property funds over the summer could well recur if the sector sees more large withdrawals, so investors should make sure they are willing to accept this on-going risk, and to hold the funds for the long term.”