Wealth management giant St James’s Place has announced the suspension of its property fund in response to a significant increase in client withdrawals and a downturn in the UK’s commercial property market demand.

The UK’s leading wealth manager revealed that as of 12pm last Friday, it had ceased dealings in the £924 million SJP Property unit trust. Concurrently, it has deferred withdrawals from its Property life and Property pension funds. This decision reflects the firm’s strategy to safeguard client interests against the backdrop of a challenging real estate market.

Tom Beal, the director of investments at St. James’s Place, emphasised that the suspension is a measure to protect client assets and avoid a hasty liquidation of properties at undervalued prices. “In these pressured circumstances, a rapid sale could lead to selling properties below their true market value, potentially causing financial losses for both the fund and its investors,” Beal explained. During this suspension period, the firm plans to evaluate market conditions and keep a close eye on the valuations of properties within the fund.

Beal also stated, “We aim to resume normal operations as soon as we are confident that the market conditions are favourable.”

This action by St James’s Place arises amidst a weakened appetite for UK commercial property, with office spaces remaining largely unoccupied and clients either withdrawing their investments or curtailing them.

In a move to somewhat alleviate the situation, St James’s Place has announced a temporary reduction in the annual management charge on the fund by 0.15 percent. This follows a recent similar step by asset manager M&G, which paused withdrawals in its £565 million UK property fund, a notable decline from its peak asset value of nearly £5 billion in 2016.

UK property funds have been particularly impacted by continuous outflows, driven by falling valuations and decreasing demand for commercial properties like office spaces and retail areas. According to Calastone, a fund data tracker, property funds have experienced consistent outflows over the 13 months leading to September, including £428 million in the nine months to that month.

The decision to freeze the funds is part of a series of challenges faced by St James’s Place. Notably, the firm has recently been embroiled in controversies regarding compensation claims, as clients seek redress for alleged investment mis-selling and overcharging. This situation has compounded the firm’s difficulties, leading to an overhaul of its fee structure, reportedly under regulatory pressure.

Amidst these unfolding events, St James’s Place’s shares have witnessed a nearly 25 percent decline over the past month, reflecting investor concerns and the broader challenges facing the firm.