UK real estate funds slowly resume trading post-Brexit

Anti-EU vote had caused asset runs, withdrawal restrictions

Sep.September 14, 2016 02:15 PM

From the New York website: U.K. private real estate funds that halted trading after Britain’s June vote to leave the European Union are returning to the market.

Columbia Threadneedle Investments, an asset manager, said Monday that its British real estate fund would allow investors to invest and withdraw money again this month. Two other asset managers, Canada Life and Aberdeen Asset Management, had lifted their own withdrawal restrictions on their U.K. real estate funds earlier this month.

Several open-ended real estate funds that hold U.K. properties either blocked withdrawals or made them costly by raising fees in the wake of the June 23 Brexit referendum. The vote sent shivers through the real estate market and caused an asset run on property funds. Unlike closed-end funds, open-ended funds allow investors to withdraw money on short notice. But because they own real estate and that tends a while to sell, a wave of withdrawals can quickly threaten a fund’s stability.

“Any effects of the Brexit vote on the overall U.K. economy, negative or otherwise, will take many months if not years to transpire, and sometime after that for the property market,” Don Jordison, managing director of property at Columbia Threadneedle Investments, said in a statement, the Wall Street Journal reported.

According to the Journal, the market has fared better than expected in the wake of the Brexit, with discounts on sales not as steep as in previous cycles.

Several major U.K. real estate funds, including Standard Life Investments, Aviva Investors and M&G Investments, still remain closed to withdrawals. Aviva said it wouldn’t reopen its real estate fund for six months.

By weakening the U.K’s real estate market, the Brexit vote could push NYC ahead of London on luxury residential properties. The NYC investment sales market is also expected to receive a hearty boost, according to some market observers.  [WSJ] – Konrad Putzier

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