UK property fund panic 'looks a lot like the sell-off in 2008'
“It’s reminiscent of Bear Stearns’ subprime funds before the Lehman debacle,” Bill Gross, a fund manager at Janus Capital said.
“The system doesn’t allow liquidity to flow into the proper places. If these property funds are just one indication, perhaps there will be others to follow. I think it’s something to worry about,” he said.
Henderson Global Investors, Columbia Threadneedle Investments and Canada Life suspended trading in at least £5.7bn of funds on Wednesday.
Aberdeen Fund Managers cut the value of a property fund by 17% and suspended redemptions so investors who asked for their money back have time to reconsider.
Legal & General Group said it is adjusting the value of its £2.3bn fund by an additional 10%.
Investors are pulling money from UK property funds as analysts warn London office values could fall by as much as 20% within three years of the country leaving the EU.
During the financial crisis of 2007 and 2008, real estate funds were similarly hit by redemptions and forced to halt withdrawals, contributing to a slump in property prices of more than 40% of their peak in Britain.
Wednesday’s moves brings the number of UK firms curbing redemptions to seven since the June 23 vote.
Henderson said it had temporarily halted its £3.9bn UK Property PAIF fund along with feeder funds due to “exceptional liquidity pressures” and the recent suspension of other funds. Columbia Threadneedle halted its £1.39bn PAIF and feeder funds and Canada Life froze four funds totaling £450m.
Aberdeen, which marked down the value of its £3.2bn UK property fund, said it was halting withdrawals for 24 hours as of noon Wednesday so clients have time to reconsider their withdrawal orders.
With the real estate tremors echoing the last financial crisis, the growing fear is that failure to control aftershocks from the Brexit vote will propel the economy into recession.
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