Published: Mon, July 11, 2016
Economy | By Melissa Porter

Pru suspends trading in single-asset property funds

Pru suspends trading in single-asset property funds

Aviva looks set to attempt to sell off property in order to increase liquidity in the fund. According to investment site Trustnet, the Aviva Property Trust holds commercial property assets across the UK.

These include Standard Life, Aviva, M&G Investments, Henderson Global Investors, Columbia Threadneedle, Canada Life and Aberdeen Asset Management.

M&G Investments joined Aviva Investors and Standard Life Investments in halting withdrawals in the last 24 hours.

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 specializes in property funds. The fund "gatings", which began on Monday, have spooked broader markets and prompted concern from the Bank of England, which warned on Tuesday that the moves might amplify any downturn in commercial real estate. Their shares are normally freely tradable daily, but a rush of redemption requests by investors can create problems in meeting such demands due to the illiquid nature of their underlying assets and limited cash buffers. It notes that the Property PAIF, with 3.9 billion pounds of assets, "has delivered to investors in line with its investments objectives".

"Suspension will give fund managers breathing space to make sure any disposals make reasonable prices and is the best way to protect investor interests", said a spokesman.

The large number of investors trying to sell their holdings in the funds is putting pressure on the fund managers to sell properties they own at sharp discounts, one fund manager said.

"The retail funds had cash and balances in liquid shares" to manage normal levels of outflows, he said.

These funds all invest exclusively in either the Aviva Investors Property Trust or the M&G Property Portfolio and its feeder fund, all of which were suspended earlier this week.

Firms said high levels of uncertainty caused by the referendum have led to investors rushing to withdraw funds.

Gilbert says feedback to their approach, which contrasted to indefinite suspensions from other major United Kingdom property funds, had been positive. But with fears of a post-Brexit recession mounting investors are concerned that the value of office blocks, retail parks and factories could plunge.

The value of United Kingdom real estate was not only hit in the aftermath of the surprise Brexit vote.

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