Individuals in the Aviva Investors UK Property Fund are to receive a fourth instalment of their trapped funds, 18 months since the fund closed.
In an email sent to investors last week (November 25), Aviva Investors said it will pay £62mn to clients in the closed fund on December 12th.
The payment, based on a percentage of the fund’s total value on the day it was closed (£367mn), is subject to change.
Aviva Investors notified individuals that it would close the fund in May last year after it was gated for a prolonged period during the pandemic.
The decision was taken to wind the fund down after the uncertainty caused by the pandemic made it 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 was gated in March 2020 alongside a slew of other property funds, after independent valuers said they were unable to accurately value real estate due to the market turmoil.
The issue raises the problem once again of the fundamental mismatch between the daily dealing of some property funds and the illiquid nature of their underlying holdings.
The issues began after the Brexit vote in 2016, when the funds rushed to gate for redemptions amid concerns over valuations.
The FCA opened a consultation into the future of open-ended property funds, however last May it said it would not confirm specific property fund rules until a consultation on the long-term asset fund had been completed.
This was concluded in October last year, and the regulator has not outlined any further details to date.
Meanwhile, the International Monetary Fund has warned that the high redemptions seen in open-ended bond funds could trigger further outflows, constituting a “major potential vulnerability”.
The body said these withdrawals could amplify market stress and “potentially undermine the stability of the financial system”.
sally.hickey@ft.com
