Kames Capital suspends property income fund due to market uncertainty
Kames Capital has become a victim of the turbulent market as it temporarily suspends its property income fund.
In a statement to investors, Kames said: “Following continued market volatility and uncertainly for property funds, which began with the 2016 Brexit Referendum and continued in recent weeks with the Corona Virus pandemic the valuers of the Kames Property Income Fund believe the current market turmoil makes it difficult to provide a true value for the funds underlying assets.”
The suspension of Kames’ property income fund and property income feeder funds came into effect on 16th March at 12pm, and the Financial Conduct Authority has been informed.
The decision was reportedly informed by the views of the fund’s independent valuer. It is understood the valuers were unable to provide a true valuation for the underlying assets because of market uncertainty.
Ryan Hughes, head of active portfolios at AJ Bell, said: “It appears Coronavirus has claimed its first fund suspension with the Kames Property Income fund suspending, once again highlighting the problem of shoe-horning an illiquid asset class into a daily dealing structure.”
“At the end of February the fund was running with cash of around 11% but events have moved quickly in recent days making it difficult for independent valuers to make accurate valuations of the underlying properties.”
Kames will review the suspension in 28 days.
It comes after M&G announced the continuation of the suspension of its £2.5bn property fund last month.
M&G suspended trading in its flagship property fund in December after investors rushed to withdraw their money.
The asset manager also blamed the unusually high outflows on Brexit-related political uncertainty, which had made it difficult to sell commercial property.
Hughes said: “With M&G Property Portfolio having been suspended since December last year, it raises serious questions about whether we’ll see a chain-reaction effect and see other property funds suspending.”
“This further reinforces the need for the FCA to make material changes to the daily pricing structure of property funds given the challenges that exist in the market when major uncertainty strikes.”