There was no respite for UK real estate funds in April, according to the latest Fund Flow Index (FFI) from Calastone. On every day of the month bar four, investors pulled money out of property, marking the seventh consecutive month of outflows.
This is the longest period of sustained selling on record for the index, and takes the total value of capital withdrawn since October to £1.2 billion. This comfortably exceeds the £1.1bn that left the sector in the year following the Brexit referendum in 2016.
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Real estate funds will take some comfort, however, from a significant slowdown in the pace of redemptions. In April, investors withdrew £66.1m, the lowest outflows since October 2018, and sharply down from over £300m in each of December and January. The FFI: Real Estate rose to 44.4, its highest level since September, though it remains below 50, the point at which redemptions (or sells) equal subscriptions (or buys). The index is showing a faster improvement than the cash value of net outflows because it takes into account how closely the two-way trading of buy and sell orders matches.
The reduction in the net outflow of capital from real estate funds has been driven much more by a significant reduction in sell orders, rather than a big rise in buying activity. The value of sell orders was £136m lower in April than at their December peak. The value of buy orders was the same in April as in March, and has only increased by £42m since December.
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”It’s too early to call a turn in the market, as uncertainty levels remain very high in the UK.”
Edward Glyn, Calastone’s Head of Global Markets commented: “With Brexit heaved to the back burner again and expectations of rising global interest rates dissipating, investors had less immediate impulse to continue shedding their property holdings in April. It’s too early to call a turn in the market, as uncertainty levels remain very high in the UK. Moreover, daily trading activity shows that negative sentiment is persistent, rather than overall outflows being driven by one or two bad days, or big decisions by a small number of investors. Even so, outflows are coming down to more manageable levels. That will come as a relief to property fund managers who have faced both pressure to sell buildings to meet the demand for cash from investors, and increased scrutiny from regulators concerned about the level of selling activity.”