SLI suspends trading on £2.7bn UK Real Estate fund

SLI suspends trading on £2.7bn UK Real Estate fund

Standard Life Investments (SLI) has suspended trading in its UK real estate fund in response to increased outflows following the UK’s vote to leave the EU.

The decision comes following “exceptional market circumstances” in the aftermath of the EU referendum, the company said. The suspension came into force at midday today (July 4).

The company added that the status of the fund will be reviewed at least every 28 days and that suspension will be lifted “as soon as is practicable”.

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SLI added in a statement: “The decision was taken following an increase in redemption requests as a result of uncertainty for the UK commercial real estate market following the EU referendum result. The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns from the range, mix and quality of assets within the portfolio.”

The UK’s decision to leave the EU has resulted in a dramatic drop in confidence among property investors, prompting a number of funds to adjust the values of their portfolios.

M&G Investments and Kames Capital are the latest to make a ‘fair value adjustment’ to their open-ended UK property funds in the wake of the UK’s decision to leave the EU, following on from Henderson, L&G, Aberdeen and SLI itself in recent days.

M&G has made a 4.5 per cent downwards adjustment to the price of its £4.6bn Property Portfolio, while Kames lowered the price of its £932m Property Income strategy by 3.7 per cent.

The Prudential subsidiary said the decision was made with the advice of the fund’s independent valuer, Knight Frank.

An M&G spokesperson added: “In reaching its decision, M&G has sought to balance the interests of shareholders who may leave the fund with the interests of those who remain at a time when it is increasingly difficult to ascertain the market value of the underlying assets.

“In these circumstances, there is a risk that investors who redeem will receive too high a value for their shares at the expense of those who stay. An [adjustment] aims to ensure fair treatment for all shareholders while market uncertainty persists.”

The fund had already begun updating fund valuations weekly rather than monthly after the vote.

A Kames spokesperson said: “The independent valuation reports we refer to have not had time, as yet, to reflect the transaction activity since the referendum vote was conducted. Therefore, in order to treat customers fairly we have made a fair value adjustment to the price of the Kames Property Income Fund.”

Kames also said it would now conduct a weekly valuation instead of monthly.

In the build-up to the referendum on June 23, fears about the impact of a Leave vote on commercial property, combined with concerns that property returns had run their course, had seen a number of funds shift from offer to bid pricing.