Bank of England was warned over property fund trading suspensions after Brexit
The Bank of England was warned that property funds could be suspended in the aftermath of a Brexit vote.
The Financial Policy Committee (FPC), which is chaired by BoE governor Mark Carney, was briefed by the Financial Conduct Authority (FCA) that the “extent of outflows from these funds and on the possibility that funds could suspend redemptions in the near term”.
Read more: Property fund to sell Oxford Street property to meet investors' withdrawals
Details of the warnings, published in the FPC’s minutes for 28 June to 1 July, have emerged after several property funds suspended trading last week.
Aberdeen Asset Management, Columbia Threadneedle, Canada Life, Henderson, Aviva, M&G and Standard Life all suspended trading on funds.
Read more: Asset managers close the gate on £15bn-£20bn funds
The FPC minutes said: “The committee had previously highlighted the risks around open-ended property funds. Since the referendum, these had seen increased redemption pressures.
“The FPC was briefed by the FCA on the extent of outflows from these funds and on the possibility that funds could suspend redemptions in the near term.”
Hargreaves Lansdown senior analyst Laith Khalaf said: "I don’t think there was any chance the Bank of England was going to intervene directly in the property fund market. The FCA will no doubt be examining the last week closely to see how things could work better in future, while the central bank will be taking an interest in the part these funds might play in unsettling the financial system as a whole. However the ructions that have occurred in the commercial property market are really just an inevitable function of the limitations of open-ended funds operating in an illiquid asset class."