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Published: Wed, July 13, 2016
Economy | By Melissa Porter

'Panic' Brexit withdrawals freeze US$23b property funds


This means that half of the 10 largest United Kingdom property-fund managers have suspended trading temporarily.

Three of the biggest providers of the funds - which offer investors returns from commercial property - have now frozen trading after Standard Life suspended its £2.9bn United Kingdom property fund on Monday.

"Suspension of dealing will give Aviva Investors greater control in managing cashflows and conducting orderly asset sales in order to meet our obligations to investors wishing to redeem their holdings".

Aberdeen has extended a dealing suspension on its United Kingdom property funds allow investors "more time to consider" the option to exit at a discount of 17%.

Aviva Investors has become the second insurer to suspend trading in its property fund, following the same move from Standard Life Investments (SLI) on its Real Estate Fund yesterday, triggering fears of more to come.

Meanwhile, the Bank of England's Financial Stability Report pointed to the risks facing the commercial property market after the Brexit vote.

"Aberdeen's property fund continues to hold a good level of cash, which permits us to offer these options to investors, but it is imperative that we protect remaining holders by fairly reflecting the impact of short term trading on values provided to redeeming shareholders".

"It's reminiscent of Bear Stearns' subprime funds before the Lehman debacle", Bill Gross, a fund manager at Janus Capital Group Inc, said on Bloomberg TV.

F&C said: "We have been closely monitoring fund flows and our ability to obtain accurate property valuations ..."

"Dominoes are starting to fall" in Britain's commercial property market, said Laith Khalaf, senior analyst at investment company Hargreaves Lansdown.

A statement from M&G read: "This will allow the fund manager time to raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values".

Aviva Investors becomes the second big insurer to suspend a fund after Standard Life Investments, the fund arm of insurer Standard Life, suspended its £2.9 billion United Kingdom real estate fund a day earlier.

Henderson Global Investors and Columbia Threadneedle Investments have suspended dealing in their property funds following the Brexit vote.

The last time Standard Life suspended trading was during the financial crisis in 2008.

Bank of England chief Mark Carney said Tuesday that commercial real estate transactions had fallen by 50% from their peak a year ago.

There's "a loss of confidence in the valuations being used" by fund managers, said John Forbes, an independent real estate consultant and former tax partner at PricewaterhouseCoopers LLP who specialises in property funds.

Henderson cited "exceptional liquidity pressures" on its Henderson UK Property PAIF and Henderson UK Property PAIF Feeder Fund in announcing the suspension.

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