Some UK property funds limit withdrawals
Yields The Collateral Gilt Hold When Calls Payments Of Future, Spiked They The Dated To Pensions Match Long Expected With That Prompting Pensioners Bonds
Asset managers including Blackrock and Schroders are limiting institutional investors’ withdrawals from some UK property funds after a wave of requests to move money.
Schroders’ UK Real Estate fund has deferred redemptions due at the start of October to as late as July 2023, which will give the £2.8bn (€3.2bn) fund more time to ensure it has enough cash to cover the payments.
BlackRock has followed similar steps for its UK property fund, while Columbia Threadneedle has halted daily dealing in its TPEN Property Fund.
The moves come as pension funds and other investors rebalance their portfolios into liquid assets such as cash after months of market volatility left them overexposed to commercial property. The market sell-off in gilts following the UK’s fiscal policies announced last month is set to worsen the issue.
Pensions hold long-dated bonds that they match with expected payments to the pensioners of the future, prompting collateral calls when gilt yields spiked. This too will require more liquid assets.
Schroders said in a statement the redemptions were requested before last week’s gilt meltdown, but the trend is likely to intensify in light of pension funds’ liquidity issues.
A spokesperson said the decision would help to “ensure sufficient liquidity is maintained in order to progress important asset management initiatives in line with performance enhancing business plans”.
About £60m has been deferred and an £8m payment will be made to investors toward the end of the month.
Columbia Threadneedle said it had deferred redemptions due to liquidity constraints resulting from the recent market volatility and that it would go back to daily dealing as soon as possible. BlackRock declined to comment.
• Bloomberg