UK real estate fund outflows slows further to £18m in January

The final week of the month saw capital flow back into the sector as investors perceived property to be a relative safe haven, Calastone said.

The market crash caused by a dramatic reassessment of the potential economic impact of the coronavirus prompted a flood of outflows from other asset classes which has favoured real estate.

Added all together, February 2020 was only the fourth month on record to see net outflows across the sum of all types of fund, the last time being October 2016. UK investors pulled a net £144m out of their fund holdings, opting to sit out the volatility in cash.

Edward Glyn, head of global markets, explains:

“Fear ate greed for lunch in the last few days of February, as equity funds saw outflows at their most ferocious in five years. After an initial flurry of outflows in January, funds benefited from extreme complacency over the coronavirus outbreak. But the news that the epidemic had taken hold in Italy and then quickly spread across the world caused a dramatic reassessment of its potential impact on the global economy. Investors have voted with their feet. It’s impossible to predict what will happen next, or whether the market has over- or underreacted to the epidemic.”

In January, outflows from UK property funds slowed to £78 million in January, the previous slowest pace since May 2019, 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.

Edward Glyn, head of global markets at Calastone, added:

“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.”

james.wallace@realassetmedia.com