We have been advised by our UK commercial property fund managers that due to unprecedented market conditions, as a result of the COVID-19 virus, they have taken the decision to suspend all dealing in their open ended funds. Property fund valuers across the market have unanimously inserted a ‘material valuation uncertainty’ clause. In effect, this means they are unable to accurately or fairly value the properties within UK commercial property funds.
As a result, we are unable to purchase or sell units in their funds during this period. A transfer of your units may be possible depending on the fund company holding and their stated rules. The investment management community have taken action they believe is in the best interest of investors, and to ensure that all investors in the UK commercial property funds receive fair treatment.
At this stage, whilst we understand from the fund managers that this is a temporary suspension, we do not know when the funds will re-open and it could be an extended period until they do. Consequently, we will not have the ability to make any changes to your UK commercial property holding within your investment portfolio until further notice.
It is important to emphasise that we believe the UK commercial property sector, in general, remains an attractive part of a diversified portfolio over the long-term:
- The funds are meeting their objectives to diversify away from equities, dampen volatility and generate income
- Our ongoing monitoring of these funds suggest that they are well-diversified, containing high-quality properties with high occupancy levels
- The fund managers are all managing liquidity prudently within the funds
- The suspension of funds is a positive measure for the long-term investors in the funds which safeguard them against any ‘panic’ selling which would create a potential liquidity risk
- Many of the property funds provide a stable income stream yield driven by underlying long-term leases, and the income yield remains at an attractive rate. The income will still be paid, although we may see income reduced if rental incomes start to drop.
- These are experienced fund managers who have navigated fund suspensions such as these in recent times. We last saw such events in response to the Brexit vote.
- Rest assured this is not a situation where these funds are being wound up and closed. This is just a suspension period.
- These funds are still being valued, albeit with caveats that no instructions can be placed.
Should you have any questions about these fund suspensions, please do not hesitate to contact your Investment Manager.
The value of an investment with Rowan Dartington may fall as well as rise. You may get back less than the amount invested.