BlackRock has been paying out investors stuck in its £3.5 billion UK property fund since early last year, even as outflows from commercial property funds continue and regulators warn some funds may struggle to meet redemption requests.
The US-based fund group has begun making partial payments to institutional investors who submitted withdrawal requests dating back to the second quarter of last year, according to people familiar with the situation. BlackRock declined to comment.
Black stone He was among a number of large real estate fund managers forced to delay redemptions last year to slow the rush for institutional exits. Many investors were spooked by the tough market conditions with inflation soaring and interest rates soaring. BlackRock Fund allows quarterly withdrawals only.
Other institutional fund managers, including M&G and Schroders, have also delayed withdrawal requests and have yet to lift the ban.
BlackRock’s move comes as the European Central Bank called this week for a crackdown on commercial advertising property money To prevent a liquidity crisis if investors rush to exit.
Commercial real estate has been pressured by sharp interest rate increases in the past year, which has pushed up the cost of financing and lower valuations. The recent banking crisis has also raised investor concerns that banks may restrict lending to the sector to shore up their balance sheets.
“Relying exclusively on bank financing is for us a potential red flag,” said Svetlana Gobre, Head of Indirect Real Assets at Abrdn. She said that real estate companies in the Nordic countries in particular depend on bank financing.
Earlier this year, BlackRock sought to rebalance its portfolio to free up liquidity, offloading real estate assets across sectors that are at the end of their investment life cycle.
Tens of millions of pounds have been withdrawn from property funds in recent weeks, and analysts said the trend is expected to continue.
According to the latest data from Morningstar Direct, European money investing directly in property has swung from inflows of nearly £300m in January to outflows of £172m in February. UK funds had £109m of outflows in February, more than double the previous month.
Real estate investing has boomed in recent years as ultra-low interest rates and near-zero or negative yields on bonds have left investors with few options for relatively stable long-term investments. As bond yields rose, real estate faced increased competition for liquidity.
“All the money that was rotated in the past from general fixed income to real estate in search of yield, is now rotating back. It is another factor in the depletion of liquidity,” said one of the top global real estate investors.
New figures from Calastone, a fund data provider, show that UK investors pulled money out of property funds for the eighth consecutive month in March, on the back of rising interest rates.
The recent rate hike over the past year, and concerns about the resulting economic slowdown, continue to put pressure on the sector. . . “Outflows are likely to continue,” said Edward Glenn, head of global markets at Calastone.