Janus Henderson has changed the pricing of its £2.7bn UK property fund to forestall the effects of outflows, after the sector experienced a surge in investors pulling their money out in recent months.
Henderson UK Property PAIF — one of the largest property funds for retail investors — will switch to a new, less variable pricing structure from March 25 in a bid to protect investors amid a spate of withdrawals.
Until now the cost of buying and selling units in the fund has varied according to the number of investors wanting to transact.
The new pricing structure will limit the difference between the buy and sell, or “bid” and “offer” prices investors pay, to ensure less pricing volatility, according to Henderson.
The new structure follows a surge in outflows from the fund in recent months, as investors have grown fearful of the impact of the March 29 Brexit deadline on the sector.
Property funds alter their pricing depending on whether they are growing, and buying assets, or shrinking and being forced to sell properties. When funds are growing they are priced on an “offer” basis, reflecting the cost of buying properties, but when investors are selling out funds change to lower “bid” pricing, and investors take a hit on the value of their units.
In recent months large property funds including Threadneedle UK Property and Kames Property Income have moved to “bid” pricing following major outflows at the end of last year.
Investors wanting to sell units in Henderson’s property funds must currently accept a price 4.5 per cent lower than those buying new units.
Retail investors pulled £315m from property funds in December, nearing the level of redemptions reached in the two months after the Brexit vote — prompting the UK financial regulator to demand daily updates on outflows.
Simon Hillenbrand, head of UK retail at Henderson, said: “We believe that this pricing approach encourages investors to treat property as a long-term investment.”
“Over time, new investors would expect to recover this cost through the income paid by the fund and the potential capital gain.”