Coronavirus worse than Brexit for fund outflows

Investors continued to pull money from UK property investment vehicles during March as funds began pulling down the shutters to prevent redemptions.

After net outflows of £2.25bn in 2019, the first quarter of 2020 saw £221m withdrawn, according to analysis by fund transaction network Calastone. Investors pulled £118m in March alone, more than in January and February combined.

Across all mutual funds, outflows in March were the worst on record, Calastone said. At £3.1bn, redemptions were triple those of what had previously been the worst month, June 2016.

Edward Glyn, Calastone’s head of global markets, said the Covid-19 crisis had “undoubtedly” had a bigger impact on investment than the Brexit referendum.

“Market crises are superficially all the same as volatility soars and asset prices collapse, but they differ enormously in the detail,” Glyn added. “The temporary loss of fixed income as a safe-haven asset class to counterbalance some of the huge losses in equity markets left investors with little option but to ride it out or park their money in cash or cash-equivalents like money market funds.”

Several big fund houses have suspended trading in property funds aimed at both retail and institutional investors in recent weeks, as the coronavirus pandemic left valuers unable to value assets with confidence.

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