The asset manager said it was gating the fund due to “challenging market circumstances” which had impacted the wider investment markets, including real estate.
In an update to investors, published today (March 18), Aviva said its independent valuer — Knight Frank LLP — had been unable to value the property owned by the fund accurately due to the market turmoil.
This meant it was challenging for the fund manager to calculate the price of its units and created a material risk to investors, Aviva said.
The £460m fund will be suspended as of noon today but no buy or sell trades have been accepted as of midday yesterday (March 17). Aviva said it would look to lift the suspension as soon as it was “appropriate to do so”.
A spokesperson added: “Although there is sufficient liquidity in the fund, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect.”
Aviva’s property portfolio is the third to shut its doors to dealing as a result of the chaos created by the spreading pandemic, with Janus Henderson and Kames Capital suspending their equivalent funds from Monday (March 16).
All three funds have been gated because the Covid-19 virus has impacted the UK property market and made it difficult to value the property owned by the funds with the same degree of certainty as would otherwise be the case.
Rules announced by the FCA last year, due to come into effect in September 2020, require property funds to automatically suspend when their valuers find material uncertainty over the pricing of 20 per cent or more of their assets, but it seems property funds are acting on this advice now despite the rules not yet being implemented.
The moves also follow M&G’s decision to suspend its £2.3bn Property Portfolio in the run-up to the December general election. That fund remains gated.
The four suspensions mean almost £5.4bn of customer assets are now locked in suspended property funds.
Jason Hollands, managing director at Tilney, said: “I doubt these will be the last open-ended property funds to suspend dealing given uncertainties around pricing in the current environment and the likelihood of significant redemption requests.
“The shock of the coronavirus crisis comes at a difficult time for commercial property funds. Funds faced considerable headwinds in 2019 from the uncertainties around Brexit and a really tough year for UK retailers.”
In December the Financial Conduct Authority and Bank of England floated a number of proposals to curb the mismatch between redemption terms and funds’ liquidity.
These included a shift in the way the liquidity of funds was assessed and that investors who pulled their cash should receive a price for their assets which reflected the discount needed to sell in the specified time period.
The FCA is expected to update the industry on the development of new rules for open-ended funds later this year.
imogen.tew@ft.com
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