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St James’s Place has suspended trading in its property fund after facing a surge in investors’ redemption requests.
The UK’s biggest wealth manager on Monday said it had prevented withdrawals from the £829.5mn property unit trust since Friday last week.
It added redemption requests have been delayed from its £563mn property life and £838mn property pension funds, which will now take up to six months to be met.
St James’s Place said it had faced a drop in investments from clients and an increase in withdrawal requests amid continuing office space vacancies after the Covid-19 pandemic.
The move follows M&G’s decision to close its £565mn property fund last week after the asset manager blamed “declining interest” from retail investors.
A week before, Canada Life Asset Management suspended withdrawals from its UK property fund, saying the “overwhelming majority” of its investors wanted an exit.
This decision is “aimed at preventing the challenge of having to sell properties quickly to generate cash”, said Tom Beal, director of investments at St James’s Place.
“Selling properties under such pressure may lead to the fund manager selling them for less than their actual market value, potentially resulting in financial losses for the fund and its investors.”
The suspensions reflect the liquidity mismatch between the daily dealing offered by open-ended property funds and the time it takes to sell a property.
A number of UK property funds suspended dealing in 2016, after the Brexit referendum vote prompted withdrawals, and then again in 2020 as the pandemic led to uncertainties over property valuations.
Shares in St James’s Place rose 1.56 per cent on Monday. They have dropped by more than a fifth in the past month as it announced a change to its fee structure.
St James’s Place said its unit trust, life and pension property funds had net withdrawals of £211mn, £131mn and £191mn respectively over the past 12 months.
The group said it had temporarily reduced the unit trust’s annual management charge by 0.15 percentage points, dropping the total charge to 1.89 per cent after the property fund suspensions.
The M&G fund was suspended for trading on October 19 and its assets will be sold and returned to investors, a process that could take 18 months, said the company. Management fees have been reduced from 0.8 per cent to 0.6 per cent.
In July, global regulators recommended fund managers running funds with illiquid assets charge clients to redeem their investments in order to damp down an exit rush.