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  • U.K. Property Funds With $16 Billion Face Reopening Dilemma

    U.K. Property Funds With $16 Billion Face Reopening Dilemma

    (Bloomberg) -- The U.K.’s biggest property funds for mom-and-pop investors that were locked at the peak of the coronavirus market turmoil have been given the all-clear to reopen. They aren’t rushing for the keys.Funds holding almost 12 billion pounds ($15.6 billion) of commercial real estate halted trading in March, leaving investors to just watch as office and shopping mall values headed south. Now, they have a choice: reopen and risk a wave of redemptions or stay closed and invite the wrath of investors.“As soon as funds open, money will leave, that’s undoubted,” said Ben Yearsley, investment director at Shore Financial Planning. “Honestly, I think most won’t reopen.”As the pandemic froze real estate markets in March, fund managers including Aviva Plc and Standard Life Aberdeen Plc were thrown a lifeline. An industry committee said most properties couldn’t be accurately valued, prompting a slew of freezes that prevented investors heading for the door. On Wednesday, that group said the uncertainty had sufficiently eased, heaping pressure on managers to re-open.Now, any failure by funds to reopen following their next valuations could be a signal they don’t have enough cash if redemption requests have piled up since their freezing. That’s despite many having relatively healthy cash buffers prior to the coronavirus crisis upending markets.Columbia Threadneedle said late Wednesday it planned to lift the suspension of its 1 billion-pound property fund. However, other managers including Aviva and Janus Henderson said they won’t immediately allow withdrawals even though the restrictions have been lifted, according to earlier statements. Janus Henderson’s board “has again formally reviewed the dealing suspension” and agreed that its affected property fund “should remain suspended to allow for the raising of additional liquidity,” the fund manager said.The invoking of so-called material uncertainty clauses in March meant managers were obliged to halt redemptions when 20% or more of their assets fell under the hard-to-value criteria. Restrictions were then eased on several types of commercial property including offices and warehouses. That has now been extended to cover most shopping malls and stores, the worst-performing real estate in recent years.Aviva said Wednesday that the decision will help liquidity in the property market. While its Aviva Investors Property Fund remains locked, the firm will monitor the market and update investors as soon as is practical, according to an emailed statement.The coronavirus pandemic is the latest event to expose the mismatch between funds that allow daily withdrawals, but hold assets that take weeks or months to buy and sell. After repeated blowups such as the aftermath of the 2016 Brexit vote, the Financial Conduct Authority is considering imposing a notice period of as long as 180 days for redemptions, with a decision expected next year.Investors who hold these funds through tax-efficient savings structures may have an extra incentive to sell their holdings. If the FCA’s plan is implemented and the money is effectively locked up for six months, the funds could be excluded from such structures.“I would expect that as soon as these funds reopen, many investors will be looking to sell their investments before any potential change in rules comes into force,” said Ryan Hughes, head of active portfolios at AJ Bell Plc. “This will force fund managers to start selling commercial properties into a very uncertain market.”The prospect of forced sales is likely to lift deal volumes in the U.K. real estate market that’s been starved of transactions. That’s particularly true for retail properties where deals have plunged to record lows, making pricing especially hard to judge.Increasingly though, there is evidence that some buyers are willing to commit to deals for retail properties, provided the price is right.The uncertainty clauses also impacted funds for institutional investors that aren’t traded daily and are more able to sell assets in time to meet withdrawal requests. BlackRock Inc., Schroders Plc and Legal & General Group Plc were among managers to freeze funds holding assets that cater to larger clients.St. James’s Place Plc, a wealth manager that runs three property funds, has lifted the suspension on its vehicles, according to an emailed statement from the company.(Updates with Columbia Threadneedle fund reopening in 6th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Earnings Not Telling The Story For Schroders plc (LON:SDR)
    Simply Wall St.

    Earnings Not Telling The Story For Schroders plc (LON:SDR)

    There wouldn't be many who think Schroders plc's (LON:SDR) price-to-earnings (or "P/E") ratio of 16.1x is worth a...

  • Former Fund Leader Fumbles Its Way to Second Best

    Former Fund Leader Fumbles Its Way to Second Best

    (Bloomberg Opinion) -- Keith Skeoch is leaving on a low. The outgoing chief executive officer of Standard Life Aberdeen Plc engineered the creation of the U.K.’s biggest standalone fund manager three years ago through a mega-merger. Figures released Friday show his firm has lost the top slot to Schroders Plc.It wasn’t supposed to turn out like this. When Skeoch merged his company with Martin Gilbert’s Aberdeen Asset Management, their aim was to create a fund management behemoth able to compete in what Gilbert dubbed the $1 trillion club. While their instinct was correct that size would be the key to survival, aiming for economies of scale to offset the relentless downward pressure on fees, the reality of combining two different cultures took its toll on the most fundamental aspect of the business – making money for customers.In 2018, just half of the firm’s funds were ahead of their benchmarks on a three-year basis, and that’s before fees were taken into account. While performance got better last year, 40% of investments still lagged their benchmark, and this year’s continued improvement to just 32% underperforming comes too late for clients who’ve been withdrawing money in droves in recent years.   Standard Life’s drop in the U.K. rankings is not a surprise. I wrote in March that its loss of a big mandate from Lloyds Banking Group Plc — the lender completed the transfer of 75 billion pounds ($98 billion) of portfolios to Schroders in April — would probably lead to a change in the league table. But it will still sting.Standard Life Chairman Douglas Flint eased Gilbert out of his co-CEO role last year, and announced Skeoch’s departure at the end of June. The new CEO, Stephen Bird, is scheduled to take over at the end of September after 21 years at Citigroup Inc., most recently as head of its global consumer banking unit, after acting as the bank’s top executive in Asia.Bird’s lack of experience in fund management can be viewed as a hindrance, but it may also let him view the business with a fresh perspective. Three years after its creation, Standard Life Aberdeen is sorely in need of a reboot.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.