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St James’s Place has halted trading in its property fund after a surge in redemption requests from investors.
Britain’s largest asset manager said on Monday it had blocked withdrawals from the £829.5 million property fund since Friday last week.
It added that redemption requests from its £563m property life insurance funds and its £838m property pension funds had been delayed, meaning they would now take up to six months to be fulfilled.
St James’s Place said it was facing a decline in investment from clients and an increase in withdrawal requests due to continued office space vacancies following the Covid-19 pandemic.
The move follows the M&G’s decision to close its £565 million property fund last week after the asset manager blamed “decreasing interest” from retail investors.
A week earlier, Canada Life Asset Management suspended withdrawals from its U.K. real estate fund, saying the “overwhelming majority” of its investors wanted an exit.
The decision aims to “prevent the challenge of having to sell properties quickly to generate cash,” said Tom Beal, director of investments at St. James’s Place.
“Selling properties under such pressure may result in the fund manager selling them for less than their actual market value, potentially resulting in financial losses for the fund and its investors.”
The suspensions reflect the liquidity mismatch between the daily trading supply of open-ended real estate funds and the time it takes to sell a property.
A number of UK property funds halted trading in 2016 after the Brexit referendum led to withdrawals, and then again in 2020 as the pandemic led to uncertainty over property valuations.
St. James Place shares rose 1.56 percent on Monday. They have fallen by more than a fifth in the past month as the company announced a change to its fee structure.
St James Place said its investment funds, life insurance funds and retirement property funds recorded net withdrawals of £211m, £131m and £191m respectively in the last 12 months.
The group said it temporarily reduced the investment fund’s annual management fee by 0.15 percentage points and reduced the total fee to 1.89 percent following the property fund suspensions.
Trading in the M&G fund was suspended on October 19 and its assets will be sold and returned to investors, a process that could take 18 months, the company said. Management fees were reduced from 0.8 percent to 0.6 percent.
In July, global regulators recommended that fund managers managing funds with illiquid assets require clients to redeem their investments to stem an exit rush.
Source : www.ft.com