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United Kingdom Real Estate Funds Have Suspended Fund Redemptions: What Does It Mean For Investors In Singapore?

After the recent vote by the people of the United Kingdom to leave the European Union – what’s commonly known as “Brexit” – investors are starting to question their investments in the UK.

Sterling’s 13% or so decline against the US dollar since the date of the vote has not helped matters.

Large real estate fund managers such as Henderson Global Investors, Canada Life, and Aberdeen Asset Management have recently suspended or deferred investor requests for redemptions. The decisions by these funds signal the huge selling pressure from investors for UK-based assets.

The funds can’t suspend redemptions forever. But given the low liquidity of real estate, it won’t be easy for the real estate funds in question to cough up the cash needed to meet redemptions. If the pressure from their investors become unbearable, the funds may be forced to sell their properties at fire-sale prices in order to raise cash.

What does this development mean for real estate companies or investment trusts in Singapore that have exposure to the UK? Stocks in this category include City Developments Limited (SGX: C09)CDL Hospitality Trusts (SGX: J85)Ascott Residence Trust (SGX: A68U), and CapitaLand Limited (SGX: C31) – the quartet all have assets in the UK.

Fortunately, the four real estate stocks do not have redemption-risks and so, they might be able to take advantage of the situation.

If the aforementioned real estate funds are forced to sell some of the properties in their portfolios, the Singapore-listed trusts and companies may have the opportunity to snap up bargains.

Yes, Brexit might bring about a crisis for the UK and increase the risk for investors in the country. But in every crisis lies opportunities as well. And if there is a run on the property funds in the UK, then companies and REITs with strong balance sheets might be well-positioned to take advantage of any panic-selling.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.