Real estate funds endured the largest and most sustained outflow of capital on record in 2019.
The year saw a record £2.2bn withdrawn from property funds, equivalent to £1 for every £15 under management, according to analysis from Calastone, the largest global funds network.
December saw outflows of £314m, the second-worst month on record.
Over the past five years, property funds have shed £1.2bn – the only major asset class not to see inflows in that period.
Following the high-profile suspension of trading in M&G’s property fund in December, investors increased their redemptions from other funds, pulling out a net £314.4m in the final month of the year.
Real estate funds have only seen a larger imbalance of buying versus selling once before – immediately after the EU referendum in 2016.
Edward Glyn, head of global markets at Calastone, said: “Although some funds have fared better than others, the net selling has been pretty indiscriminate. The suspension of a major fund in December has only spurred further outflows from the sector, as investors fear their capital becoming trapped in funds unable to trade.”
Glyn added that more stability for fund managers “would be very welcome” to enable them to “hold less cash and manage outflows more effectively”.
He continued: “This almost certainly means an end to the promise of cash on demand under all circumstances, but such a change would be helpful in the long run.”
In 2019, real estate was the only one of the main asset classes to suffer a net outflow of funds: fixed income, equity and mixed-asset funds all enjoyed inflows. The real estate sector last saw significant inflows in 2015, but over the past half-decade it has shed a net £1.2bn of capital – the only asset class to lose funds over that time.
Elsewhere, Boris Johnson’s election victory served as a catalyst for investment, particularly for UK-focused equity funds, which absorbed £1bn in new capital in December. This was twice the previous monthly record set in July 2015. Furthermore, December saw the largest ever inflow of capital from domestic investors to UK equity funds, according to the fund transactions network.
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