Kames furthers pricing adjustment on £409m property fund


Kames has made its second pricing adjustment to its property income fund and its feeder fund since the UK’s vote to leave the European Union.

The initial reduction of 5 per cent in fair-value pricing has now been reduced to 10 per cent on direct property values. It equates to 8.5 per cent of the fund’s value.

It follows in the same direction as Legal & General Investment Management, which yesterday announced it was cutting the value of its property fund by 10 per cent, having initially dropped it by 5 per cent.

In a statement, Kames says it expects market volatility to continue in the near term, but that the longer-term impact of the Brexit vote on the UK property market was difficult to forecast.

More than half the £25bn property fund sector is now suspended with Aberdeen, Columbia Threadneedle Investments and Henderson Global Investors among the latest to halt trading. They followed in the footsteps of M&G, Aviva and Standard Life Investments.

Prudential this morning announced it had temporarily suspended trading in its single-asset unit-linked property funds that invest solely in either the Aviva Investors Property Trust or the M&G Property Portfolio and its feeder fund.

The suspensions prompted Fitch to issue a statement on commercial property in which it warned gating “can be challenging to reverse”.

While Fitch said gating helps mitigate the “inherent risk” in open-ended funds, it said during the global financial crisis the majority of German open-ended real estate funds that suspended trading were forced into a liquidation process that is still ongoing.

Fitch says reduced foreign capital flows will cause a decline in prime commercial real estate valuations from stretched pricing to “more sustainable levels based on longer-term yields”.

It said London property would come under pressure if companies reduce or relocate their offices and that UK retail was likely to come under more pressure following the Brexit vote, adding to existing challenges from online shopping.