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Brexit blamed for high withdrawals

M&G and Aviva join Standard Life to halt trade in funds

Standard Life Investments

Aviva and M&G have become the latest companies to suspend trading in property funds as Brexit worries prompt investors to withdraw cash.

Standard Life Investments yesterday halted trading in its UK property fund as a result of “exceptional market circumstances” following the Brexit decision.

M&G followed suit by suspending trades in its £4.5bn property portfolio and Aviva Investors took the same action over its £1.8bn property fund.

Aviva said: “The extraordinary market circumstances, which are impacting the wider industry, have resulted in a lack of immediate liquidity in the Aviva Investors Property Trust.

“Consequently, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect. Suspension of dealing will give Aviva Investors greater control in managing cashflows and conducting orderly asset sales in order to meet our obligations to investors wishing to redeem their holdings.”

Standard Life Investments, the fund management arm of Standard Life group, yesterday said: “The suspension was requested to protect the interests of all investors in the fund.”

This the first time Standard Life has taken such action since the 2008/09 financial crisis. Its £2.9bn fund is invested in a mixture of commercial property n the UK. Standard Life Investments was forced to write down the value of the fund by 5% last week.

It said the suspension would end “as soon as practicable” and it would review the decision every 28 days.

The SLI statement said: “Due to exceptional market circumstances, Standard Life Investments has taken the decision to suspend all trading in the Standard Life Investments UK Real Estate Fund (and its associated Feeder Funds) from 12:00 noon on 4 July 2016.

“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 Standard Life Investments UK Real Estate Fund invests in a diverse mix of prime commercial real estate assets from across the office, retail, industrial and other sectors. Its lower risk positioning should be beneficial for performance in times of market stress and uncertainty. The fund continues to offer a stable and secure income return with a distribution yield of c3.86% (SLI UK Real Estate Fund, Institutional Income Share – class on 15 June 2016).

“However, unlike investing in equities, the selling process for real estate can be lengthy as the fund manager needs to offer assets for sale, find prospective buyers, secure the best price and complete the legal transaction. Unless this selling process is controlled, there is a risk that the fund manager will not achieve the best deal for investors in the fund, including those who intend to remain invested over the medium to long-term.

“Approval for the suspension was received from Citibank Europe plc, in its capacity as Depositary for the fund. The suspension will end as soon as practicable, and will be formally reviewed at least every 28 days.”

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