The double threat of a no-deal Brexit and Covid-19 could force major property funds to stay gated until next year, predict experts
Following the outbreak of Covid-19, funds controlling billions of pounds worth of property assets froze trading in March, as valuers warned of the “material uncertainty” over the valuation of UK property caused by the pandemic.
In early September, RICS recommended lifting the material valuation uncertainty on real estate, prompting a number of major funds – including L&G UK property and Columbia Threadneedle – to announce plans to unfreeze their funds.
However, experts fear that continued concerns about the pandemic and the stalled negotiations over a Brexit deal could keep many funds gated, while also forcing some that have reopened to close once again.
“Look at the uncertainty the economy faces – the renewed threat of a no-deal Brexit and Covid-19 cases that are ticking up again,” said Dewi John, head of UK Refinitiv Lipper research.
“All of this adds up to uncertainty within the sector,” he said. “I can’t see these gatings fundamentally being lifted on funds this year at all and possibly early next year.”
Remaining closed was the prudent thing to do, he added. “If the issue of material uncertainty comes back into effect, they might not have any choice in the matter anyway,” he said.
Ryan Hughes, head of active portfolios at AJ Bell, agreed that funds were unlikely to reopen until 2021.
“I wouldn’t be at all surprised if it takes until 2021 for many funds to open up again,” he said. “The ones that have opened are the ones with the biggest cash balances; they have been able to open because they’re in a stronger position.”