Which commercial property funds were worst hit in the wake of Brexit?


Data collected from Morningstar for Fund Strategy reveals the extent of the outflows from gated commercial property funds following the vote to leave the EU.

The Henderson UK Property Paif Feeder fund is a unit trust for those investors who cannot, or do not wish to, invest directly in the £3.1bn Henderson UK Property Paif fund.

The data reveals the Henderson UK Property PAIF fund has lost £630m since the Brexit vote and £643m for the year to October.

For the year to date, the PAIF Feeder fund has lagged the UK Property category, falling 4.36 per cent against 2.55 per cent loss of the benchmark, while the PAIF also underperformed the category, losing 3.72 per cent over the same period.

Henderson says the Feeder fund only invests in shares in the PAIF and “should therefore broadly perform in line with the PAIF”.

Meanwhile, the Aberdeen UK Property Feeder fund saw outflows of £503m since June, the second-largest loss after the Henderson UK Property PAIF, which shed £603m since the EU referendum.

However, the £491m Aberdeen UK Property fund suffered the biggest losses through the year of all 17 UK-domiciled commercial property funds, with outflows of almost £3bn. Since the Brexit vote in June it had outflows of £58.6m.

Taking stock of the market

Overall, more than £4.5bn flowed out of commercial property funds this year, despite most funds suspending dealing amid a surge of redemption requests.

Morningstar says the data on commercial property funds is subject to review as it can fluctuate based on changes to share classes and fund structures.

Hargreaves Lansdown senior analyst Laith Khalaf says commercial property has been a “hugely popular” sector since before the start of the year, despite the fallout during the summer. He says: “Commercial property funds were on the podium of the most popular sectors, especially for people looking for income and diversification as bond funds become too expensive because of monetary policies.”

From 5 July, both the Henderson UK Property PAIF and its associated Feeder fund were suspended, while Aberdeen took a different approach, applying a downward adjustment of up to 17 per cent to pricing for those seeking to redeem cash from its property funds. The fair value adjustment was then decreased to 5 per cent in August.

Standard Life Investments, M&G, Columbia Threadneedle, Henderson and Aviva Investors are among fund groups that have imposed temporary “gates” on existing investors. Other groups have, like Aberdeen, have applied pricing adjustments.

All the fund groups have now lifted the suspensions.

At the time, both the FCA and the Bank of England said they would examine ways to restructure property funds to prevent another panic.

This week, the FCA has again raised concerns over the wave of fund suspensions and whether fund groups could have been more transparent with investors.