Property funds – 25 March 2020

Property funds – 25 March 2020

It has been announced that the majority of UK property funds have temporarily suspended dealing. This means it’s not currently possible to buy, sell or switch holdings in these funds.

Unsurprisingly, this suspension in dealing is due to the Coronavirus. These unprecedented conditions, and the potential impact on the economy and businesses, means that it is very difficult to put a true value on assets such as large commercial properties. Under these circumstances, the funds ACD or Depositary believe it is in the best interests of investors to suspended dealing within the funds. This is to ensure that investors selling do not receive a higher value than those investors remaining in the funds.

The funds will all continue to be managed and the fund prices will continue to change every day to reflect, as best as possible, the value of the investments they hold. Whilst property fund values have changed little during this crisis so far, I think we have to assume their will be some downward price adjustments as the economic impact becomes clearer.

The capital values of commercial properties are determined primarily by the value of the stream of rents from tenants. Should the Coronavirus issues prove to be temporary and the governments efforts to prop up the country successful in keeping businesses and individual’s solvent, then any price decline may be short-lived.

This is not the first time we have experienced temporary dealing suspensions in property funds; the same thing happened in the credit crunch and following the Brexit vote. Unless investors need to access specific amounts invested in these funds then the impact of this dealing suspension is limited. In the same way as any other funds in portfolios at the moment, it is sensible to leave investments and give them time to recover.

If you have any concerns about your specific plans then please don’t hesitate to contact me.

Protection And Investment Ltd