January’s £78 million redemptions among retail investors – the 16th consecutive months of outflows – were down from £329 million in December and £2.2 billion over 2019, in a year marked by Brexit uncertainty and late-cycle nerves that weighed on sentiment. The improvement in net outflows was a steep reduction in selling, rather than an uptick in purchasing. Buying activity fell to £137m in January, the lowest level since September 2016, Calastone’s data shows.
Edward Glyn, head of global markets at Calastone, explains:
“The real and present danger of contagion across the whole property fund sector seems to have been contained, but it is not out of the woods yet. From a cashflow perspective, sharply lower redemptions give fund managers valuable breathing space to rejig the portfolio and rebuild liquidity buffers, but a buyers’ strike leaves the sector vulnerable to any further negative news in the short term.”
In November, the £2.5 billion M&G Property Portfolio, one of the UK’s biggest property funds, was suspended after “unusually high and sustained outflows” prompted by “Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector”, the investment manager announced. The news triggered a spike in monthly redemptions to £251m in November and £329 million in December. Accumulative redemptions by retail investors in UK open-ended property funds have now reached £2.9 billion since October 2018.
Edward Glyn, head of global markets at Calastone said the coronavirus hit has spooked some retail investors. “The response of fund investors shows how the virus was most impactful for fund categories where its effect will be greatest, like Asia.”