Legal & General Investment Management (LGIM) is contemplating increasing its exposure to real estate investment trusts (REITs) within its £1.3 billion L&G UK Property fund to tackle liquidity concerns.

Pending regulatory approval, LGIM indicated that this might involve introducing a property hybrid fund option, granting access to both direct property and REITs.

This decision arises amidst a wave of investor redemptions affecting the direct property sector.

In light of the current FCA consultation on funds investing in UK property, LGIM has stated that the L&G PAIF and its feeder fund will remain open to investors.

Despite the ongoing FCA consultation, LGIM emphasized that the fund’s size and liquidity remain stable. As of 31 October 2023, cash and REITs accounted for 20.7% of the funds. The completion of the sale of the Woodside Industrial Estate in Dunstable for £139 million has significantly bolstered the fund’s cash position.

LGIM reaffirmed its commitment to providing investors ongoing access to direct UK property investments, considering it an attractive diversifier for balanced portfolios and suited to those with long-term investment horizons.

Oli Creasey, Head of Property Research at Quilter Cheviot, commended LGIM’s innovative approach in exploring new solutions rather than simply “giving up” or continuing on the same path. However, he cautioned that the execution of the strategy would be pivotal to its success.