The £1.8bn Henderson UK Property fund will reopen next month having been among the host of UK open-ended property portfolios forced to close as a result of the uncertainty around UK real estate valuations.
FTAdviser has learned the fund is due to remove its suspension on February 24, having built up a substantial liquidity buffer by selling a range of properties ahead of an expected wave of redemption requests when the fund reopens.
Darius McDermott, managing director at Chelsea Financial Services said: “Janus Henderson, like other open-ended property fund managers, will have been in close dialogue with its largest investors to get a handle on possible redemptions once the suspension is lifted. So the company is now obviously confident that they can meet any such redemptions and avoid having to close again.
“Diversification within the portfolio remains strong, as does the income yield and potential for income growth in the future. Despite the obvious problems facing commercial property in 2020, rental collection was strong. The void rate, which has historically been lower than many competitors also remains low.”
The fund has been suspended since March, when all brick-and-mortar property funds gated after independent valuers said they were unable to provide accurate and reliable valuations for the funds’ assets.
This was largely a response to the coronavirus pandemic and the ensuing lockdowns across Europe, but also due in part to uncertainty around Brexit.
Rules announced by the Financial Conduct Authority last year require property funds to automatically suspend when their valuers find material uncertainty over the pricing of 20 per cent or more of their assets.
It was the second time in four years that investors in property funds had been locked away from their cash. A number of funds were forced to pause trading in July 2016 after thousands of investors pulled their cash in the aftermath of the EU referendum.
Janus Henderson is now one of many property funds to reopen its doors since September, when the Royal Institution of Chartered Surveyors recommended a general ‘lifting’ of material valuation uncertainty from areas of UK real estate.
Rics’ announcement essentially allowed property funds to reopen if the asset manager saw fit.
But most managers did not immediately respond. St James’s Place bucked the trend and opened its fund on the first day, while Columbia Threadneedle’s equivalent portfolio reopened to investors mid-September.
Aberdeen Standard Investment, Royal London, BMO and LGIM are among those to have ungated their property funds, while Aegon, Aviva and M&G’s counterparts remain shut.
Tide is turning
The Financial Conduct Authority is soon expected to announce the results of its property fund consultation, which proposed rules which would require investors to give notice — potentially up to 180 days — before their investment is redeemed from an open-ended property fund.
It is an attempt to curb the “liquidity mismatch” between the underlying property held in such funds and the daily basis on which investors buy and sell units.