UK real estate funds suffered a third year of net outflows in 2021, as investors withdrew £2.1bn during another year of Covid-19-fuelled market uncertainty.
Fund network Calastone described the figures as marking another “painful” year for the industry, taking net outflows since October 2018 to £6.3bn. But Edward Glyn, the company’s head of global markets, noted that 80% of the year’s outflow came in the first six months, and that redemptions lessened over each of the past eight months.
“Even with our offices and streets once again half empty as the Omicron variant spreads across the UK, the long winter for the property sector may finally be coming to an end,” Glyn said.
“Companies have now worked out what their property needs are in the post-Covid world, and the pandemic is likely to fade into the background in the months ahead. With only the diehards still left holding on to property funds, there is a lot of room for deserters to return and new buyers to test the sector for the first time.”
The outflows from real estate funds over the past three years came as investors posted net inflows to other asset classes, including £25.2bn to equity funds and £14.8bn to bonds. Equity net inflows for 2021 stood at a record £14.2bn.
“Having paused in late November to consider the possible impact of the Omicron wave of Covid-19, investors have so far cautiously judged that its impact will be significantly less severe in the UK and abroad. That’s driven new cash into equity funds,” said Glyn.