Aviva Investors has suspended trading in its property trust, following in the footsteps of Standard Life Investments.
The asset manager says “extraordinary market circumstances” have led to “a lack of immediate liquidity” in the £1.8bn Aviva Investors Property Trust.
“Consequently, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect. 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,” says a company spokesperson.
The asset manager has seen higher than usual volumes of requests to redeem from the trust.
Aviva Investors says it had positioned the trust, which is run by Mike Luscombe and Andrew Hook, to be more risk averse and “weather the headwinds facing the UK real estate market…as we have moved towards the end of the current property market cycle”.
It will continue to sell assets to provide liquidity, but says sales will focus on “properties that are considered to be at the end of their growth cycle; and those where there are opportunities to sell to purchasers who may pay premium prices”.
Standard Life Investments suspended trading on its £2.7bn UK real estate fund and its associated feeder funds yesterday. The suspension will last for at least 28 days and will remain in place until it is “practicable” to lift it, with the decision being reviewed at least every 28 days.
Laith Khalaf, senior analyst at Hargreaves Lansdown, says: “The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It’s probably only a matter of time before we see otherfunds follow suit.
“The problem these funds face is that it takes time to sell commercial property to meet withdrawals, and the cash buffers built up by the managers have been eroded by investors heading for the door, both in the run up to the EU referendum, and in the aftermath.”
The move came as incoming FCA chief executive Andrew Bailey warned the structure of open-ended property investment funds may need to be reconsidered.
“We have been in close touch with these firms involved with these funds. But my preliminary feeling, after two and a bit days, is that these issues need to be looked at,” he says, adding that the FCA is also in “very close touch” with firms in the sector.