Property fund suspensions a sign of things to come

Property fund suspensions a sign of things to come

The suspension of dealing on three of the UK’s largest property funds has intensified fears of a run on the asset class with other investment managers predicted to follow suit.

It was followed by the suspension of trading in the shares of the £4.6bn M&G Property Portfolio and its feeder fund.

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Earlier in the week, Standard Life Investments suspended its own UK real estate portfolio following an increase in outflows in the aftermath of the EU referendum.

Aviva Investors said “extraordinary market circumstances” had affected its UK Property Trust’s ability to meet redemptions.

A spokesperson said: “We have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect.

Earlier this week SLI announced it had suspended redemptions on its £2.9bn UK Real Estate fund after the UK’s vote to leave the EU caused it to haemorrhage money.

Financial experts have said this fund suspension is just the start, as more investors look to exit commerical real estate funds. The total amount invested in UK open-ended property funds was estimated at £34bn.

Patrick Connolly, certified financial planner at Bath-based Chase de Vere, said the speed and scale of Standard Life’s move was surprising, particularly because the provider seemed to have “sufficient levels” of cash and liquid assets to cater for anticipated withdrawals.

Ben Yearsley, investment director at the Wealth Club, said: “Unfortunately, one fund suspending may well lead to a run on other property funds, as other investors panic and sell their holdings.”