UK property funds switch charges as outflows rise


UK property funds are switching pricing structures in response to outflows, with Standard Life Investments, Henderson Global Investors and M&G Investments announcing changes.

Most recently, Standard Life Investments UK Property fund and Ignis UK Property fund switched from the offer price to the mid price, effective 13 May.

A day earlier, M&G changed its pricing basis from offer to bid for its Property Portfolio and Feeder of Property Portfolio, moving in the same direction as the Henderson UK Property Oeic, which also made the same changes last week.

The changes in pricing effectively shift costs to those investors selling out of the funds, rather than spreading them evenly across investors.

M&G said in a statement that the move was a reflection of current flows and was not related to the liquidity position of the fund.

SLI said its funds had seen “broadly neutral to slightly negative cashflows” and it expected the trend to continue in the coming months.

Property funds use higher offer pricing when inflows are leading them to make more purchases and therefore incur higher costs such as stamp duty land tax. If the fund is stable or selling properties it switches to the bid pricing structure.

A spokesperson from SLI said the move is intended to ensure “fair treatment of all investors whether they are transacting now or investing for the longer-term”. The same rationale was shared by M&G and Henderson.

“In our real estate funds, it is our objective to prevent investors being disadvantaged by the negative impact of transaction costs associated with an increase in either inflows or outflows,” the SLI spokesperson said.

The switch resulted in a downward price impact of about 5.5 per cent on both SLI funds, while Henderson said 5 per cent was the industry standard for the gap between bid and offer pricing.

“Despite heightened global uncertainty, projections for UK economic growth remain relatively robust and provide a backdrop for positive domestic real estate returns,” the SLI spokesperson said. 

“With this in mind, we still believe the outlook for the asset class remains attractive from a fundamental point of view and can expect single digit, positive total returns for investors over the next three years.