The storm in the UK bond market is far from over, and investors are now frantically pulling out of UK property funds.

Earlier this week, British Prime Minister Truss renounced abolishing the 45 per cent top income tax rate after unveiling a tax cut that triggered market turmoil, leading some investors to think the turmoil would come to an end.

However, the tax cut plan is not only the trigger for British pension funds to continue to frantically sell billions of pounds worth of assets to make up for margin, the frenzy of selling is also rapidly spreading to British real estate funds: real estate funds tracked by fund trading provider Calastone showMore than £100m was withdrawn from property funds in just 10 days after the UK government announced the tax cut, almost eight times the average in the previous three weeks.

Analysts warn that such continued divestment could push property valuations down further, worsening the situation. UBS estimates that the total property value of this sell-off is 20% to 25% lower than it was earlier this year.

According to media reports, Edward Glyn, head of global marketing at Calastone, believes thatThe sell-off came as bonds became more attractive, investors worried about a possible recession in the property market, and higher market interest rates increased refinancing risks.

Roger Clarke, head of IPSX, says real estate funds usually give investors the opportunity to withdraw within a day:

The fund is forced to sell its best assets. The redeemed investors are then redeemed, and if valuations fall, the rest of the fund will suffer losses. As a result, rational investors do make redemption requests.

Clarke added that the most likely entrants to property funds may be those with sufficient financial resources not to be "seduced" by the attractiveness of the bond market: "I'm afraid we're going to see a lot of UK assets flowing overseas to sovereign wealth and private funds, and UK institutions and savers are losing their iconic assets again."

Is the pension fund behind this?

The UK fixed benefit pension fund, a major investor in property funds, has been reducing its holdings of real estate assets for months as rising interest rates and slowing economic activity have put pressure on the property market; falling prices of UK government bonds have also increased the proportion of real estate in pension fund portfolios, prompting some funds to reduce their investments in them.

Subsequently, the collapse in the price of gilts made the situation worse, and pension funds faced huge margin requirements.The pace of asset sales had to be accelerated again to cover the position.

According to media reports, Calum Mackenzie, an investment partner of pension consulting firm Aon, said:

I think this is part of a long-term trend for pension funds to reduce risk by selling illiquid assets. At present, the deterioration of short-term liquidity of pension funds has exacerbated this trend.

Industry insiders say the sharp deterioration in loan conditions has made it difficult to reach deals on unlisted assets. Funds that hold assets that are difficult to sell have been particularly difficult this year, with volatility in the stock and bond markets prompting investors to rush to redeem cash.

In addition, the rapid divestment has created problems for some property funds, which can take months to sell properties in their portfolios to complete payments to investors.

Last week, Schroeder, Blackrock and Columbia Threadneedle all imposed restrictions on redemptions from property funds to slow the pace of redemptions for investors so that they could sell properties in an orderly manner.

Schroeder postponed some redemptions due on October 3 until July next year, while Columbia Threadneedle stipulated that investors could only withdraw on a monthly basis rather than on a daily basis, citing "liquidity restrictions caused by recent market volatility and subsequent increases in redemption requests" Meanwhile, Blackrock, the world's largest asset manager, imposed redemption restrictions on the £3.5 billion Blackrock UK property fund after receiving a large number of redemption requests in the second quarter.