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July 5, 2016 | Three UK Asset Managers Freeze Withdrawals From Property Funds

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

In the wake of Brexit, investor fears on the value of property, especially in London have surfaced.

A flurry of redemptions from property funds is so great that three UK fund managers froze redemptions. And the British pound is at 100-year lows.

British Pound

100 year British Pound

Three Funds Freeze Withdrawals

Bloomberg reports Brexit Erodes U.K. Economic Pillars as Property Investors Flee.

Three asset managers froze withdrawals from real-estate funds following a flurry of selling and the pound plunged to a 31-year low less than two weeks since the nation backed quitting the European Union. Rushing to fill the political vacuum, Bank of England Governor Mark Carney signaled easier monetary policy and urged prudence on households.

“I am expecting quite a sharp reduction in investment spending, a sharp hit to the commercial property market, probably a check to consumer spending, all of which could push us towards zero or below growth,… John Gieve, a former deputy governor of the Bank of England and veteran of the last crisis, told Bloomberg Television.

Reacting to a rush by investors to redeem their money, M&G Investments and Aviva Investors followed Standard Life Investments in suspending trading in commercial-property funds that together total 9.1 billion pounds ($11.9 billion dollars). Industry analysts have warned that London office values could fall by as much as 20 percent within three years of the U.K. leaving the EU.

20% Correction a Bad Thing?

Property values in London are so ridiculous, one has to ask: Are falling real estate prices a bad thing or a good thing?

Is 20% just a start of what’s to come? Is Brexit to blame or simply a catalyst for an eventuality already baked into the cake?

On a side note, I seldom link to Bloomberg anymore. In fact, I seldom even read Bloomberg anymore thanks to auto-play videos that are hard to kill. I cannot stand autoplay, and nearly every Bloomberg article comes loaded with the damn things.

Mike “Mish… Shedlock

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July 5th, 2016

Posted In: Mish Talk

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