Barclays Global Investors Funds (BGIF) is to close its property fund, Barclays Property by the end o...
Barclays Global Investors Funds (BGIF) is to close its property fund, Barclays Property by the end of September.
By closing the £16m fund, the group is going against market consensus that now is the time to buy commercial property.
John Kelly, investment director at BGIF, said: "Our view is that it is now the time to sell. The rally in property prices provides an opportunity to exit a sector that has been disappointing and will be disappointing in the future.
The intention is to switch investors into Barclays General fund in the UK All Companies sector. If they prefer, investors can have a free switch into BGI Gilt & Fixed Interest.
BGIF's doubts about commercial property rest on the effects of low inflation and the increased use of technology.
Kelly said: "There is no indication the Government will tolerate inflation. If we are to join Emu, then the UK must have prudent policies. In general, people are managing costs better and the use of IT is driving down prices.
"Companies do not invest as many of their interests in property as they did. If the rent is not right, they move away. Owners are increasingly finding problems with transitory tenants.
"There is also a high level of obsolence. Even buildings constructed in the 1980s may not be sufficient to cope with the huge amounts of power needed to drive the technology companies are using. Although land itself may be worth more, the obsolete building on it may be worth nothing or in fact be a liability.
He noted there was no commonality across the property market, with some areas of the UK, such as the north-east and east Midlands, being depressed.
Unitholders have received letters and an EGM is planned for 19 August to hold a vote on the proposals. Kelly said that of responses already received, 90% agreed with the plans.
'Advice will be delivered in new exciting ways' - Iress
Engagement and influence
Win free places at the awards
Our weekly heads-up for advisers