Top asset managers put new exit restrictions on $9.3 bln UK property funds

LONDON, Nov 3 (Reuters) - Two of Britain's largest asset managers are deferring withdrawals from funds managing 8.3 billion pounds ($9.28 billion) of UK property, the companies told Reuters on Thursday, in fresh signs of deteriorating sentiment towards UK real estate.

Legal & General Investment Management is ditching monthly trading for large investors in its 3.7 billion pound Managed Property Fund, while M&G said it was deferring redemptions from its 4.6 billion pound Secured Property Income Fund.

Both managers said the changes, in place since Nov. 1, are designed to protect clients remaining in the affected funds, by keeping working capital at sufficient levels and allowing time to pursue orderly sales of assets.

LGIM said trading in all other property funds, retail and institutional, was unaffected.

Open-ended real estate funds across Britain have been battling to meet a surge in redemption requests, against an uncertain economic backdrop and sharp rises in interest rates which have challenged the investment case for property.

Property funds run by Columbia Threadneedle, Schroders , CBRE Investment Management and BlackRock, which manage more than 10 billion pounds in assets on aggregate, have been subject to redemption deferrals since last month.

The moves by LGIM and M&G on Thursday mean major funds overseeing around 17 billion pounds in UK real estate assets are now restricting exits to prevent firesales.

Many British pension schemes, in particular, are looking to cut their exposure to property to rebalance portfolios after offloading large volumes of more liquid assets during a crash in the market for UK sovereign bonds, or gilts, in late September.

Money markets were thrown into turmoil after former Prime Minister Liz Truss unveiled proposals for billions of pounds in unfunded tax cuts that crushed the pound and sent gilt yields soaring.

Her successor, Rishi Sunak, and Britain's new finance minister, Jeremy Hunt, have scrapped virtually all planned tax cuts and signalled a much tighter rein on public spending instead.

"...the exceptional market conditions and the impact of the political turmoil over the past few weeks have now necessitated the implementation of the Managed Property Fund's deferral policy," Michael Barrie, Director of Fund Management for LGIM Real Assets, said in an emailed statement.

LGIM said it was maintaining "a prudent position on cash management" without giving details on the amount of cash held by the fund. Details on the new trading terms were not immediately available.

Separately on Thursday, data from funds network Calastone showed UK investors withdrew 184 million pounds from property funds in October, the biggest monthly outflows since June 2021. ($1 = 0.8942 pounds) (Editing by Jane Merriman)