Outflows from property funds intensified in May as Indian-variant Covid brought calls for extension to restrictions

Property funds suffered their second-worst outflow on record in May, according to the latest Fund Flow Index (FFI) from Calastone, the largest global funds network.

UK investors sold down GBP445 million of their real-estate fund holdings in a single month. Only March had seen a worse picture for the category since Calastone began recording flows in 2015. Net outflows have now reached GBP5.6 billion in the record 32 consecutive months that investors have been selling. Only equity income funds have seen a longer run of outflows.

By value, sell orders outweighed buy orders by five to one, generating an FFI:Real Estate of just 17.3 (a reading of 50 means buys equal sells).

Selling intensified from  11th May as some experts began to call for a delay to the lifting  of Covid restrictions on 21 June.

Edward Glyn, head of global markets at Calastone, says: “Record outflows from real-estate funds in March reflected investors booking capital losses before the end of the tax year, as these can be used to limit capital gains tax liabilities. We cautioned that sharply lower outflows in April were likely to prove temporary, but we were surprised by the level of selling activity in May.

"The big change since last month has been rising anxiety about the spread of the Indian variant of Covid. Anything that delays the return to offices and the removal of limits on capacity in hospitality, retail and leisure venues is bad for commercial property in the short term. Recent survey data suggests the long term may also be gloomier as companies plan to cut floorspace in future. This seems to have spurred further selling of property funds from investors who seem to be looking for reasons to be negative on the asset class.”