13 August 2016 – by David Hatcher
The managers of more than £14bn of funds currently frozen to redemptions are considering a co-ordinated reopening.
The move comes after Aviva this week said its £1.8bn fund would stay sealed for redemptions for at least six to eight months.
Many funds have the same investors and they have raised concerns that whichever fund opens first will be at an unfair disadvantage. The proposal could help stabilise the different vehicles which have been steadily selling assets since their closures in early July.
Five funds run by Henderson, Aviva, Colombia Threadneedle, M&G Investments and Standard Life closed to redemptions in the aftermath of the EU referendum. In the days following the vote to leave the EU, the UK’s biggest retail funds were flooded by requests from investors to redeem cash fearing a decline in property values.
One fund manager said: “It would be helpful to have some kind of co-ordination under the auspices of the Association of Real Estate Funds. The different fund managers are conferring and the Financial Conduct Authority is being kept informed.”
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Another said: “It is not easy to open again without creating a moment of uncertainty for yourself. You want funds to talk to each other and come up with a sensible solution rather than try to arbitrage each other.”
The need to involve the regulator is of particular importance in order to avoid breaching anti-competition regulation. The FCA’s new chief executive Andrew Bailey has already said that the sector “needs to be looked at”.
The biggest concern for managers is that if they reopen their funds with insufficient liquidity, there is another rush on redemptions and this erodes confidence in their funds for good. This occurred in Germany following the financial crisis in 2009 and led to the sale of €14bn (£12bn) of assets between 2012 and 2015 and the near disappearance of the industry in the country.
“The doomsday scenario is going for the door and then having to shut again – then you are dead in the water,” said another fund manager.
Aviva’s plan to remain closed into 2017 has caused dismay among its rivals, some of which believe delaying reopening could tarnish all funds.
