UK, St James Place Suspends Two Of Its Property Funds

By Brett Hurll

  In a recent turn of events, St James’s Place has placed a halt on dealing within its £820m property fund, reacting to the broader economic tremors that continue to ripple through the real estate sector. Alongside this, the firm has also extended the redemption period for two of its other flagship property funds, underlining a cautious approach amidst a landscape of dwindling investor enthusiasm for commercial real estate.

These two funds, significant pillars in the life and pension fund sector with portfolios pegged at £563 million and £838 million respectively, are still open to redemption requests from investors, albeit with a longer waiting period now in play. This strategic move by St James’s Place is geared towards preserving the robustness and stability of these funds against a backdrop of diminishing demand for UK commercial properties, a phenomenon accelerated by the advent of remote working and its consequent effect on office vacancy rates.

The root of the firm’s decision can be traced to a broader trend, as investors are increasingly shying away from parking their savings in commercial real estate. The pandemic has notably shifted the narrative, casting a long shadow on brick-and-mortar establishments while escalating interest rates have further exacerbated property valuations over the preceding year.

Since the onset of the previous year, a near £1 billion exodus from UK property funds has been recorded, as per data furnished by Calastone. St James’s Place acknowledges a rise in withdrawal requests from its clientele, alongside a noticeable dip in investment amounts from those continuing to invest.

Tom Beal, the investment director at St James’s Place, expressed the firm’s standpoint as a measure to shield client interests. The step also serves as a bulwark against the rush to liquidate properties to meet cash demands, a scenario that could potentially undervalue properties and inflict financial wounds on both the fund and its stakeholders.

In the interim, the SJP Property unit trust remains in suspension, with St James’s Place expressing its intent to revive dealings when market conditions are deemed favorable. A slight reduction in the annual management charge by 0.15 percentage points has been effected until then.

In a related development, M&G has embarked on the winding down process of its principal property fund last week, indicating a waning interest in open-ended funds amidst the challenges beleaguering the commercial property sector.

The liquidity mismatch inherent in such funds against the illiquid nature of commercial properties has come to the forefront yet again, reminiscent of the redemption freeze post the Brexit referendum in 2016, and during the early tremors of the pandemic.

St James’s Place shares took a 1.7% dive to 616½p, marking a 44% slump this year to date. Last week witnessed a further dip post the firm’s decision to discard its high exit fee structure, a move anticipated to shave its margins and incur an upfront cost north of £140 million.