Private investors withdrew 10.2 billion euros from euro-denominated property funds in the 12 months to April amid warnings that falling valuations could put pressure on liquidity for property products.
The redemptions mark a sharp turnaround from the past 12 months, when funds attracted inflows of about 2 billion euros, according to data compiled by Morningstar.Total net assets held by open-end and exchange-traded funds fell below 163 billion euros last month, the lowest level since August 2019.
The data came days after the European Central Bank warned that a downturn in commercial property markets could pose challenges for real estate investment funds. In its financial stability review, the regulator said write-downs may not have been fully priced in and a surge in redemption requests could strain funds’ cash buffers.
That could force them to sell assets to comply with demands to leave — a scenario that would be a repeat of the situation after the Brexit vote, when many UK property funds halted trading and had to quickly sell assets as investors withdrew their money.
Currently, real estate fund managers typically require fairly long notice periods before investors can get their money back.
The ECB also said in its report that commercial property prices could fall further due to falling demand, especially for offices, and added that if losses in the sector start to rise this could have an impact on the asset quality of some lenders.
Withdrawals into sterling property funds resumed in April after small inflows in March. Investors withdrew almost £55 million from funds last month, taking total redemptions this year to more than £927 million.
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