The post-Brexit crisis in open-ended property funds continues to ease with Henderson Global Investors the latest investment group planning to reopen its main UK property fund.
Trading in the £3.4 billion Henderson UK Property fund and its feeder fund was suspended two months ago in response to a surge in withdrawal requests from worried investors after the EU referendum result.
The group has now said the funds will open for dealing next month. It will begin processing orders tomorrow, ahead of a full re-opening on 14 October.
The announcement follows a number of disposals by the fund in order to generate the money it needs to pay departing investors. This includes its former flagship property, 440 The Strand in London, home to private bank Coutts, which went under offer last week, having been put up for sale after the Brexit vote on 23 June.
‘We are pleased with the pricing attained on the assets sold in the period since 23 June 2016, with the majority of sales exceeding 31 December 2015 valuations,’ said Ainslie McLennan who manages the fund with Marcus Langlands Pearse.
‘[We are] comfortable that this was achieved without compromising the diversification and performance potential of the remaining property portfolio,’ McLennan said in a statement.
Henderson said the notice period would allow investors time to make ‘informed decisions’ ahead of the reopening.
The Henderson funds are the most recent of a series of UK bricks and mortar mandates to reopen after ‘gating’ in investors while they hurriedly found buyers for some of their properties. Columbia Threadneedle and Canada Life have also lifted the suspensions on their main open-ended property funds, while Aberdeen and F&C Investments have reduced the penalties imposed on investors selling holdings in their property funds.
Last month’s cut in interest rates has revived investor interest in property, particularly real estate investment trusts (Reits), which offer high yields because of their ability to pay out their rents tax free in dividends to shareholders.
Commenting in today’s full-year results from City of London (CTY), an equity income trust run by Henderson, manager Job Curtis explained why he held nearly 6% of the fund in Reits.
‘While capital values may fluctuate with investment demand, the income from leading Reits held in the portfolio, such as Land Securities [LAND] and British Land [BLND], seems very secure given high quality tenants, long leases and cheap financing.
‘New holdings were bought in Hammerson [HMSO] (a leading owner of shopping centres in the UK and France) and Redefine International [RDI] (an income focussed Reit owning a diverse range of properties in the UK and Germany).’
The suspensions have revived debate over whether open-ended funds – which offer daily access to investors – have the right structure to invest in an illiquid asset like physical property.
In the 12 months to 16 September Henderson UK Property PAIF significantly underperformed its rivals, dropping 6.3% versus an IA UK Direct Property loss of 1.6%. It has also fallen short over five years, rising 25.36% compared to the 25.44% sector average.