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Aviva Investors to close UK property fund over liquidity concerns

Aviva Investors to close UK property fund over liquidity concerns

Aviva Investors is to close its UK property fund over value and liquidity concerns.

The firm told shareholders today (May 19) that a review conducted in the firm’s value assessment determined that it would be in investors’ interests to wind up the fund, alongside its two feeder funds.

The group said that during the past year, as many property funds gated amid pandemic-caused valuation uncertainty, it became increasingly challenging to generate positive returns whilst also retaining enough liquidity to re-open the fund.

The firm highlighted how, given the expense of acquiring, managing and disposing of property, size was particularly important for real estate funds.

However, due to the level of cash it anticipated it would need to fulfil redemption requests once it re-opened, the benefit of the economies of scale and diversification of the fund would be limited.

The fund, which has been closed since March last year, will remain gated until July 19 when it will be terminated.

The majority of property funds have now re-opening after gating during the start of the pandemic, however Aegon Asset Management’s property fund is still struggling to sell assets to re-open for withdrawals.

The firm said it would re-open the fund when it reaches satisfactory liquidity levels, to ensure it can match the level of redemptions requested by investors.

It is currently holding a cash position below its target liquidity level, as “property sales can take time and must be done in an orderly manner to ensure we achieve a reasonable price for our investors and do not compromise the portfolio’s characteristics and future performance prospects”.

Earlier this month, the FCA delayed the conclusion of a consultation into how to fix the liquidity mis-match of property funds that have left investors unable to withdraw their investments for months at a time when funds gate amid uncertainty.

The watchdog released the results of its previous consultation on fund notice periods - which included a suggestion that investors in open-ended property funds could have to wait 180 days to get their money back.

But it has said it needs more time to receive feedback on a new structure it is proposing to solve the issue - the long-term asset fund.

sally.hickey@ft.com