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UK investors' property fund outflows in October biggest seen since June 2021

By Elizabeth Howcroft

LONDON (Reuters) -Property funds saw a surge of outflows from UK investors in October as the UK grappled with the impact of the "mini-budget", but the outflows reduced when Liz Truss resigned as Prime Minister, funds network Calastone said on Thursday.

UK investors withdrew 184 million pounds ($207.66 million) from property funds in October, the biggest monthly outflows since June 2021, Calastone said.

But the net outflows from equity funds overall slowed. UK investors withdrew 422 million pounds ($476.27 million) in October, down from a record 2.4 billion pounds in September, Calastone's data showed.

Investors' lack of confidence in the UK was exacerbated by the UK government's "mini-budget" on Sept. 23 which sent government bond yields soaring and the pound plunging.

Property fund outflows were on average 12 million pounds per day when Liz Truss was prime minister in October, but this dropped to 3 million per day after she resigned, Calastone said.

In the six days before Truss's resignation, investors pulled 238 million pounds from UK-focused equity funds, but in the three days following her departure, there were modest inflows of 2.5 million pounds, Calastone said.

UK-focused equity funds have lost 6.65 billion so far this year, three times more than European equities, Calastone said.

PROPERTY PROBLEMS

The commerical property sector is grappling with higher costs of borrowing and a possible recession that could depress prices by up to a fifth. Pension funds and other institutional investors have switched out of property funds as rising rates make riskier assets less attractive.

LGIM said on Thursday it is deferring monthly dealing by institutional clients in its managed property fund. Property funds managed by Columbia Threadneedle, Schroders, CBRE Investment Management and BlackRock also said last month that they were deferring redemption payments.

"With a recession now baked in, the short-term outlook for property is poor," said Edward Glyn, head of global markets at Calastone.

($1 = 0.8861 pounds)

(Reporting by Elizabeth Howcroft, editing by Sinead Cruise)