Notice of changes to the pricing approach of the Janus Henderson UK Property PAIF and the Janus Henderson UK Property PAIF Feeder Fund

14/02/2019

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Summary of the change in pricing approach

The Janus Henderson UK Property PAIF and the Janus Henderson UK Property PAIF Feeder Fund (“the Funds”) will change from being dual priced on a quoted-spread basis to being dual priced on a full-spread basis, with effect from 25 March 2019. 

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.

Key points to note are:

  • During the second half of 2017 and the first half of 2018, the Funds experienced an increased number of pricing basis changes (see the graph below)
  • 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 unsettling and potentially confusing for investors
  • When we change our approach to pricing for the Funds, the price at which you can sell your shares/units will not be impacted as the Funds are currently being priced on a bid basis
  • The buying (quoted offer) price will continue to be higher than the selling (quoted bid) price and will fully reflect the costs of buying and selling properties. The Funds (non-transacting investors) will ultimately benefit from the full spread
  • Investors will lose the opportunity to buy shares/units at a lower price when the Funds are on a bid basis or redeem shares at a higher price when the Funds are being priced on an offer basis
  • Overall, we believe the change will be in the best interests of investors and we set out the benefits in more detail in this letter

Please continue reading this letter for a full explanation behind the change of pricing approach.

A video update providing further information can be found below.






Background

The Funds currently change their pricing basis depending on whether they are growing in size (as a result of money from investors coming into the Funds) or shrinking (when investors take money out of the Funds). If, overall, the Funds are growing they will be priced on an “offer basis”, reflecting the additional costs of buying physical properties. If they are shrinking overall they will be priced on a “bid basis”, reflecting the cost of selling properties to give investors their money back. This approach to pricing works well when the overall direction of money flowing into or out of the Funds is consistent. For more information on what is included in the price of funds please refer to our “A Simple Guide to Fund Pricing”, available from the literature library on our website.

During the second half of 2017 and the first half of 2018, the Funds underwent a longer period of uncertainty in terms of the overall direction of money flowing in or out.  As a result, the pricing basis of the Funds changed between bid and offer a number of times during this period, as shown by the approximate 4.25% price changes in the chart below. The last of these saw the Funds move to a bid basis on 12 June 2018.

Janus Henderson UK Property PAIF – examples of recent pricing basis changes

Source: Janus Henderson UK Property PAIF ‘A’ accumulation share class quoted bid price percentage change in value, rebased to zero, from 03.01.2017 to 31.12.18.

On each occasion that the pricing basis changes, the quoted prices for the Funds will move by approximately 4.25%. The offer basis reflects the substantial costs incurred in buying properties (stamp duty land tax being the most significant cost) and so is approximately 4.5% higher than the bid basis. These movements do not reflect any changes in the value of the underlying properties owned by the Funds and, based on feedback we have received, can be unsettling and potentially confusing for investors.

During 2018, we completed some client research to assess the pros and cons associated with the different approaches to pricing property funds. We considered a number of options. On balance, we believe the proposed change of moving to a full-spread basis is the best approach and will bring some additional benefits to investors but we acknowledge that other pricing models exist within the UK property funds peer group. Additionally, in April 2018 the Financial Conduct Authority (FCA) published some new rules in concluding its Asset Management Market Study that will come into effect on 1 April 2019. These new rules mean that our current approach to pricing needs to change to remain compliant.


Impact

As the Funds are currently being priced on a bid basis, the value of your 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.

Moving to pricing the fund on a full-spread basis will mean that any purchases of shares/units in the Funds from 25 March 2019 will be at the quoted offer price, which currently is approximately 4.5% higher than the quoted bid price, the price at which investors can sell, as shown in the diagram below.

Source: Janus Henderson Investors, as at 31 January 2019. For illustrative purposes only.

We believe the change in pricing approach will have the following benefits:

  • The complete removal of disconcerting price changes for investors. No further pricing basis changes will occur. Price performance better reflects the changes in the value of the underlying assets and is no longer distorted by money flowing into or out of the Funds
  • It encourages investors to treat property as a long-term investment because the full transactional cost of buying and selling properties is borne up-front by the investor through the visible difference in the buying and selling prices. Over time, new investors would look to recover this cost through the income paid by the fund and the potential for capital gain (much like if investors bought and rented out a property themselves)
  • It continues to look after the interests of non-transacting investors by fully passing on the costs of buying or selling of properties to transacting investors. The Funds (i.e. non-transacting investors) will benefit from the full spread
  • The revised approach will be compliant with the FCA’s new rules that take effect on 1 April 2019

Please note that while the selling (quoted bid) price will not be impacted, new purchases made after 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).

Additionally, we are taking this opportunity to reduce the 5% initial charge on the A share/unit classes of the Funds to zero.


When will the change in pricing approach take place?

On 25 March 2019 we will change the approach to pricing for the Janus Henderson UK Property PAIF and the Janus Henderson UK Property PAIF Feeder Fund. We will reduce the initial charge on both Funds’ A share/unit classes to zero on the same date. 

The investment process, the way the Funds are managed and the risk profiles of the Funds will not be altered by the change in pricing approach.

You do not need to take any action but if you are not happy with the changes you are free to switch into one of our other funds or redeem your shares/units. We will not make any charges if you decide to switch or redeem your shares/units but a switch into another fund or a redemption will be a disposal for capital gains tax purposes and you may incur a capital gains tax liability. Please consult your financial adviser if you have any questions regarding your ongoing investment in the Funds. 

If you have a query about this change or any other questions regarding your Janus Henderson investments, please contact your financial adviser or speak to our Client Services Team on 0800 832 832 (or +44 1268 443 914 if you are calling from overseas) between 9am and 5.30pm Monday to Friday. Please note that Janus Henderson is not permitted to give you any advice about your investments.




These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

For promotional purposes.


Important information

Please read the following important information regarding funds related to this article.

Janus Henderson UK Property PAIF

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Janus Henderson Investors (Singapore) Limited, 138 Market Street, #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

Information on this document is on Henderson's best endeavours.

Specific risks

  • This Fund is dual priced. The price at which you buy shares/units in the fund will incorporate the transaction costs incurred in buying physical properties. When you sell shares/units in the Fund the price you sell at incorporates the transaction costs incurred in selling physical properties. The difference between these prices is called the ‘spread'. This spread is currently c. 5% and reflects the high transaction costs of buying and selling commercial property. Typically the buying price of an individual commercial property can be 7-8% higher than the selling price. The spread of the Fund is not fixed and may vary over time depending on the composition of the Fund.
  • Some or all of the Annual Management Charge and other costs of the Fund may be taken from capital, which may erode capital or reduce potential for capital growth.
  • This fund is designed to be used only as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this fund.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • The Fund contains assets which may be hard to value or sell at the time and price intended. In particular, property investments may take a considerable time to sell. When many investors want to sell their shares, the Fund may have to delay processing requests so that certain assets or properties can be sold first. This is known as deferring redemptions.
  • The Fund's value may fall where it has concentrated exposure to a particular industry that is heavily affected by an adverse event.
  • Valuations are determined by independent property experts. The valuation of property is generally a matter of valuer's opinion. The amount raised when a property is sold may be less than the valuation.
  • Tenants in the Fund's properties may become unable to pay their rent. As a result, the Fund's income may be impacted and further costs incurred.

Risk rating

Janus Henderson UK Property PAIF Feeder Fund

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Janus Henderson Investors (Singapore) Limited, 138 Market Street, #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

Information on this document is on Henderson's best endeavours.

Specific risks

  • This Fund is dual priced. The price at which you buy shares/units in the fund will incorporate the transaction costs incurred in buying physical properties. When you sell shares/units in the Fund the price you sell at incorporates the transaction costs incurred in selling physical properties. The difference between these prices is called the ‘spread'. This spread is currently c. 5% and reflects the high transaction costs of buying and selling commercial property. Typically the buying price of an individual commercial property can be 7-8% higher than the selling price. The spread of the Fund is not fixed and may vary over time depending on the composition of the Fund.
  • Some or all of the Annual Management Charge and other costs of the Fund may be taken from capital, which may erode capital or reduce potential for capital growth.
  • This fund is designed to be used only as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this fund.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • The Fund contains assets which may be hard to value or sell at the time and price intended. In particular, property investments may take a considerable time to sell. When many investors want to sell their shares, the Fund may have to delay processing requests so that certain assets or properties can be sold first. This is known as deferring redemptions.
  • The Fund's value may fall where it has concentrated exposure to a particular industry that is heavily affected by an adverse event.
  • Valuations are determined by independent property experts. The valuation of property is generally a matter of valuer's opinion. The amount raised when a property is sold may be less than the valuation.
  • Tenants in the Fund's properties may become unable to pay their rent. As a result, the Fund's income may be impacted and further costs incurred.

Risk rating

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