Who gets the house?

Since the late 1960s we have known that the personal is political. But equally, it seems the political is often personal. ‘Divorce’ is now probably the most overused metaphor describing the UK’s decision to leave the EU. It highlights how emotional this break up is.

Illustration by Ben Jennings

Following the vote, some investors tried to extricate – or divorce – themselves from certain assets, but were, in the case of commercial property funds, in for a surprise.

First, Standard Life suspended redemptions from a retail property fund. Aviva followed suit, and M&G Investments also stopped trading for a £4.4bn fund. Another three – Henderson Global Investors, Columbia Threadneedle, and Canada Life – have since locked the doors.

Again, this sounds very familiar. Liquidity and all that. It seems we’re in for another rocky ride – the question is just how rocky.

But when one door closes, another one opens. Some asset managers say now is the time to focus on residential opportunities.

Residential property is of course less vulnerable to economic downturns than commercial property. At least that is what I always heard from my contacts when I still covered Swiss pension funds. While the whole high street might be closing down, people still always have to live somewhere.

Indeed, residential property became more and more prominent in Swiss institutional portfolios as gilt yields went lower and lower – a stable income provider, even if the yields on property also dropped as demand soared and outstripped supply.

It will be interesting to see if UK schemes will turn to residential property eventually. Of course, UK housing stock is very different to that in central Europe, and the speed of house price rises often makes it less interesting to keep hold of the asset.

But what else is there to generate income, now gilt yields have proven the pessimists right?

Sandra Wolf is editor at Pensions Expert. You can follow her on Twitter @SandraCWK and the team @pensions_expert.