The Janus Henderson UK Property Paif and its feeder fund have been suspended for the second time in two years.
The asset manager confirmed last week that it was “exploring various options” for its £1bn ($1.32bn, €1.21bn) open-ended property fund, including selling the “entire portfolio to a single purchaser”.
AJ Bell’s head of investment research, Ryan Hughes, said the suspension, which went into effect from 12pm on 3 March 2020, “will allow for a more orderly process in selling but will no doubt cause significant concern for investors in the £1bn fund who now can’t access their money again”.
He added that the whole property sector “has been under a cloud for some time, given the FCA’s review into the space and we still await the outcomes of that process. Quite clearly, it can’t come soon enough for investors who remain in limbo and once again see their assets stuck in a fund that they can’t sell”.
The Janus Henderson Property Paif first suspended dealing in March 2020 at the outbreak of the pandemic and only reopened on 24 February 2021.
Fundamental mismatch in liquidity
Before the sale rumours were confirmed, Quilter Cheviot property research analyst Oli Creasy warned that “the temptation in this situation is to submit a redemption request asap and try and beat the crowd”.
But said that “may not be in the investors’ best interests” as “it is quite possible [the assets] could be sold promptly and potentially at a premium to the fund’s valuation, representing possible upside for investors willing to wait and see”.
That choice, however, has now been taken off the table following the decision by Janus Henderson to gate the fund.
Hughes said the move “once again underlines why open-ended property funds remain ill-suited to the daily dealing expected from Oeics”.
“The fundamental mismatch in liquidity means that as soon as funds come under pressure, they have little option but to suspend to avoid investors rushing for the exist faster than the managers can sell the underlying assets.
“It’s certainly possible that this move may push investors in the few other open-ended property funds to re-evaluate their exposure and potentially sell out, causing a ripple effect.”
Open-ended property funds have continued to see tepid demand since re-opening to investors after the Covid crisis. The sector was hit by £188m worth of redemptions in 2021. Aegon and Aviva were forced to liquidate their funds, while Abrdn decided to merge its property funds.
Best chance of success
Janus Henderson said “various factors have contributed” to the suspension. “The ongoing uncertainty in the UK over the future of open-ended funds invested in direct, physical property within a daily-dealing structure has contributed to persistent net redemptions from the Paif.”
This has reduced AuM “materially to the point of challenging the portfolio’s future shape and quality, along with expected returns to investors”.
Suspending the fund “will give the sale of the entire property portfolio to a single buyer the best chance to succeed”, Janus Henderson added.
Head of UK retail, Simon Hillenbrand said: “Having researched a number of options, we believe the best solution is to promptly execute the sale of all of the Janus Henderson UK Property Paif’s property assets to a single buyer.
“The net proceeds will then be distributed to investors according to their holdings in the Paif and its feeder fund. While we cannot currently provide a firm completion date, we are optimistic that a sale could be finalised towards the end of March/early April.
“Proceeds should be able to be returned to investors by the end of April. We believe it is in the best interests of investors in the fund that we take steps now to secure the best outcome for them.”
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