BMO becomes first property fund to lift suspension
The fund is the first of several open-ended property funds forced into suspension in March to start trad…
16th June 2020 09:34
by Tom Bailey from interactive investor
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The fund is the first of several open-ended property funds forced into suspension in March to start trading again.
BMO Property Growth and Income has resumed trading, following its suspension in March.
The fund is the first of several open-ended property funds forced into suspension in March to start trading again.
Mounting fears around the economic impact of the virus in March saw asset prices fall significantly, including property. However, notably, independent property valuers said in March that they could not provide accurate and reliable valuations for the properties in the fund’s portfolios following large market volatility, forcing the majority of commercial property funds to suspend withdrawals.
Open-ended property funds forced to suspend included those from Columbia Threadneedle, L&G, Aberdeen Standard Investments, Kames Capital and Janus Henderson.
The BMO Property and Growth fund has re-opened before all the others, largely due to it having a much lower exposure to direct property (30% of the portfolio) and parts of the market still deemed too difficult to value. The remaining 70% is held in property shares.
In a statement BMO Global Asset Management confirmed “it has resumed dealing in the BMO Property Growth & Income fund (and the BMO Property Growth & Income Feeder fund), following the fund’s standing independent valuer removing material uncertainty from valuations covering the industrial and logistics sectors in the UK.”
Open-ended property funds being forced to suspend in times of market volatility has become a recurring issue. Most notably, following the Brexit vote in 2016, many open-ended funds suspended trading.
This, combined with the Woodford debacle, has led to questions about whether it is appropriate for open-ended funds, which promise daily liquidity, to be used to invest in illiquid assets such as property.
UK property funds saw significant outflows over the past year due to fears about Brexit and the weakness of commercial property dedicated to retail purposes.
Most notably, in December of 2019, M&G Property Portfolio, a fund with over £2 billion under management, was forced to suspend redemptions. At the time, most major open-ended property funds noted that they had adequate cash reserves.
The M&G Property Portfolio remains suspended. Recently it was announced one of the fund’s managers, Fiona Rowley, will step down. Rowley had been part of the M&G real estate team for 27 years. Co-manager Justin Upton will become the sole manager of the fund once Rowley departs.
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
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