Standard Life Investments (SLI) has become the latest fund management house to announce it will lift the suspension on trading in its property fund. Trading in the firm's UK Real Estate fund will reopen on 17 October.
The firm says it has 'implemented a controlled and structured asset disposal programme' over the past 12 weeks and has now raised sufficient liquidity to meet future redemptions, adding that the 'commercial real estate market has now stabilised'.
SLI was the first firm to suspend trading in its property fund following the UK's vote to leave the European Union. This was due, it said at the time, to 'exceptional market circumstances', those circumstances being a rush for the exit by investors, hitting the fund's liquidity.
NORMALITY RETURNING TO PROPERTY MARKET
SLI was followed by a number of other companies in gating their funds back in July, but a number, including those run by Legal & General, Columbia Threadneedle and Canada Life, have subsequently removed exit penalties and lifted suspensions completely. Aberdeen has also eased restrictions for sellers.
Henderson UK Property has announced its fund will reopen three days before SLI's, on 14 October, while Fiona Rowley, manager of the M&G Property Portfolio, told investors recently that she was working hard to reopen her fund after receiving interest from shareholders looking to re-invest.
Like Rowley, Lynn Scott, director of SLI, believes that 'a level of normality is returning to the UK property market', with economic data since the referendum being nowhere near as negative as anticipated, 'although the heightened uncertainty has had some impact on overall transactional activity'. That is a trend that is likely to continue.
'In the environment where the economic fundamentals are expected to soften further and with uncertainty remaining above "normal" levels, we expect lower returns from property than has been the case over the last few years,' Scott adds.
'In this environment, the steady secure income component generated by property is likely to be the key driver of returns going forward over the near term. We firmly believe that [SLI UK Real Estate] is well positioned for the medium to long term, primarily resulting from property's stable income return.'
Laith Khalaf, senior analyst at Hargreaves Lansdown, says the recent reopenings of property funds shows there is 'some semblance of normality' returning to the sector.
However, despite fund managers' attempts to keep an ongoing cash buffer in order to protect funds against future redemptions, Khalaf doesn't think they are out of the woods just yet.
'The big freeze that beset property funds over the summer could well recur if the sector sees more large withdrawals, so investors should make sure they are willing to accept this ongoing risk, and to hold the funds for the long term,' he adds.