Frozen UK property funds not sold to retail investors here

Fear of falling real estate prices in the UK has prompted investors to get their cash out of property funds quickly.
Fear of falling real estate prices in the UK has prompted investors to get their cash out of property funds quickly. PHOTO: BLOOMBERG

Redemption of European funds with exposure to British assets remains largely normal

The type of funds focused on British real estate that have seen almost panicked redemption demand in the wake of Brexit are not sold to retail investors here, a Straits Times check with several banks and fund managers showed.

About seven property funds in Britain have frozen withdrawals, including those managed by Henderson Global Investors, Columbia Threadneedle, Canada Life and Aberdeen Asset Management, as investors rush to get their cash out.

Investments of more than £18 billion (S$31.3 billion) have been frozen - the biggest such event since the global financial crisis.

Aberdeen, which temporarily blocked trading of its UK Property Fund and Feeder Fund to noon today, told The Straits Times that "those funds are not available in Singapore".

The affected funds are also not offered by Fundsupermart.com, which provides about 16 property funds to retail investors here.

"We do not have UK-specific property funds. Of the 16 property funds we offer, most of them are global in nature, only two are focused on Europe and they all have underlying assets that are liquid," said Mr Kean Chan, senior analyst at iFAST Financial, which runs Fundsupermart.com.

Mr Chan noted that the underlying assets of the funds offered comprise listed securities of companies or real estate investment trusts.

While equities can be affected by market volatility, they are generally considered to be more liquid than physical property, which takes more time to sell.

A reason cited for the curb on redemptions by British property funds is that the managers may not have sufficient time to offload property to meet withdrawals if a large number of investors demand their money at the same time.

"Retail UK property funds have been gated as a result of redemption requests exceeding the free cash within these funds. These 'gatings' will help protect the remaining investors from fire sales of the underlying property assets," said Mr Graham Mackie, head of global real estate Asia Pacific at UBS Asset Management.

Banks here said they have limited exposure to British-focused funds and do not offer those that have been suspended.

OCBC Bank told The Straits Times that some customers have invested into European funds that have some exposure to equities in Britain.

"Our advice to investors who are exposed to European investments is to pare down their holdings. Despite that, we have observed that most of our customers have adopted a wait-and-see approach, and are holding on to these funds," noted OCBC's head of wealth advisory, Mr Gregory Choy.

Standard Chartered Bank said it offers some European funds that would have exposure to assets in Britain, and those that are more exposed have seen a "correction of 10 to 15 per cent" in the last couple of weeks, owing to the drop in British property stocks and the pound.

"The funds, however, remain fully liquid and allow for daily redemption to clients who are looking to redeem their holdings. We have not received any notification on any potential suspension of withdrawals from the fund managers," StanChart added.

Aberdeen Asset Management said that redemption of its funds registered for sale in Singapore - Aberdeen European Opportunities Fund, with 42 per cent exposure to Britain, and Aberdeen Global Opportunities Fund, which has a 13 per cent exposure - has been "normal (and) nothing out of the ordinary".

A version of this article appeared in the print edition of The Straits Times on July 11, 2016, with the headline 'Frozen UK property funds not sold to retail investors here'. Print Edition | Subscribe