Covid-ravaged UK property funds hit with record outflows

Investors pulled £589m from UK property funds in March, marking the worst month on record for a sector that is still reeling from the Covid crisis.

Real estate funds overseeing billions of pounds of assets have begun trading again in recent months, having lifted dealing restrictions put in place when Covid hit in last March last year.

As hotels, offices, shops and restaurants closed their doors amid national lockdowns, property funds stopped investors withdrawing cash as they were unable to obtain accurate valuations for their portfolios.

According to data from Calastone, the outflows for March were significantly higher than British property funds’ £391m in investors withdrawals in December 2018, amid growing uncertainty over the UK’s departure from the European Union.

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Calastone said withdrawals from UK property funds accelerated during the first three months of 2021, with investors taking out £128m in January and £314m in February.

Edward Glyn, head of global markets at Calastone, said investors had considered their investment options during the ISA season, favouring equity funds that are “well placed to capitalise on the economic rebound that is sure to follow as the pandemic subsides”.

Equity funds posted a record month for inflows, gathering £2.96bn from investors, according to Calastone. Active fund managers in particular enjoyed a bumper month, scooping up over three quarters of this amount — their biggest haul since July 2015.

Glyn said investors did not have the same optimistic outlook for UK property funds.

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“As one company after another announces that it will allow employees to work from home permanently and as the high street staggers punch-drunk from surging online retailers which have made hay during the pandemic, investors have judged that property looks too risky until greater clarity emerges about how occupancy trends will develop across the various commercial sectors,” he said.

Most of the UK’s largest property funds have now lifted suspensions, including those from Aberdeen Standard Investments, L&G, Columbia Threadneedle and Janus Henderson.

M&G’s UK Property fund, the first to suspend in December 2019, is yet to reopen.

The asset manager said earlier this month it was continuing to raise cash levels in the fund, which it expects to reopen by the end of the second quarter.

Columbia Threadneedle’s UK property fund, which lifted its suspension in September, is among those that have posted outflows. According to separate data from Morningstar, investors have pulled around £129m from the fund since the start of 2021. The fund had approximately £667m in assets under management at the end of March.

To contact the author of this story with feedback or news, email David Ricketts

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