Janus Henderson Investors is amending the pricing on its £2.8bn UK Property PAIF and UK Property PAIF Feeder funds to prevent the mandates from being impacted by money flowing in and out of the vehicles.
With effect from 25 March 2019, the funds will move from being dual priced on a quoted-spread basis to being dual priced on a full-spread basis. At the same time, the group said it will reduce the initial charge on both funds' A shares/unit classes to zero.
Dual priced on a quoted-spread basis means a separate buying (quoted offer) price and selling (quoted bid) price are set with a narrower spread than the full spread. The basis for these prices varies depending on supply and demand for the shares/units of the funds. Dual priced on a full spread basis means that the spread is more stable and fully reflects the costs of buying and selling properties, the group explained.
As the funds are currently being priced on a bid basis, the value of an investor's existing holding, which is based on the quoted bid price, will not change as a result of the move to pricing on a full spread.
The group said any purchases made from 25 March 2019 will be dealt at the buying (quoted offer) price, but thereafter valued at the selling (quoted bid) price - approximately 4.5% lower than the buying price paid.
A Janus Henderson statement said: "We believe the change in pricing approach will better reflect the changes in the value of the underlying assets, and will not be distorted by money flowing in or out of the funds. Therefore removing price swings and the volatility that goes with this
"The decision follows a period of heightened price volatility of the funds in the second half of 2017 and the first half of 2018. These movements had nothing to do with the underlying value of the property investments and were solely down to the changing pattern of money flowing into and out of the funds, which we believe to be potentially confusing for investors."
Property fund pricing has been under the spotlight for many years and more so since the Brexit referendum in 2016, which prompted many investors to exit the asset class and groups were forced to suspend redemptions.
Since then, the Financial Conduct Authority has aired its concerns about property held within an open-ended mandate and as recently as earlier this week the regulator said it was more actively monitoring daily liquidity updates from property funds after further outflows from the sector prompted by Brexit uncertainty.
Janus Henderson pointed out this decision has been in the making for some time.
The statement continued: "We conducted extensive client research in 2018 to assess the different approaches to pricing property funds. We believe the changes we will make are in the best interests of long-term investors."
Simon Hillenbrand, head of UK retail, added: "Our main priority has always been our clients and we believe that this pricing approach encourages investors to treat property as a long-term investment. Over time, new investors would expect to recover this cost through the income paid by the fund and the potential capital gain."
The Janus Henderson Property fund, which is run by Marcus Langlands Pearse and Ainslie McLennan, currently has £2.8bn in assets under management down from a peak of just over £4bn in 2016 but AUM has been steady since the end of that year.
Darius McDermott, managing director of FundCalibre welcomed the pricing announcement: "We support this move as investors struggle to understand swing pricing. This is a clear and transparent for clients and should encourage investors to view property as a long-term asset class."