Three large property funds suspend trading

by Property 118

11:48 AM, 6th July 2016
About 2 years ago

Three large property funds suspend trading

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Three large property funds suspend trading

M&G Property Portfolio fund valued at £4.4billion, Standard Life Investments UK Real Estate fund valued at £2.7billion and Aviva Investors Property Trust valued at £1.9billion have all suspended trading to protect the liquidity of the funds after a run on withdrawal requests.property fund

This run on withdrawals was exacerbated by fears of a fall in commercial property values post Brexit. Obviously there has not been enough time elapsed to prove an actual (statistically relevant)  fall in values based on sale comparables.

Aviva confirmed that extraordinary market circumstances have led to a lack of immediate liquidity. Standard Life reported the suspension was requested to protect the interests of all investors in the fund.

After this development it was confirmed that Andrew Bailey of the Financial Conduct Authority is looking into changing the structure of open ended property investment funds and said he was in very close contact with the firms involved.

The Standard Life fund had a cash/liquidity ratio of 13%, the Aviva fund was at 9.3% for the end of May and the M&G fund was only 6.7% by the end of June.

As the liquidity ratios of other big property funds fall it is likely they too will need to consider suspension of trading when they reach between 15% and 10%.



Comments

Mandy Thomson

15:22 PM, 6th July 2016
About 2 years ago

Is this likely to have any kind of knock on effect on residential property? It's obvious that unless incentives are provided, the residential markets will be affected, and probably will still be affected even with incentives (though hopefully not as much). For the moment, BTL lenders are providing sweetners to stimulate demand, and Mark Carney stated that the residential property market has passed stress testing with flying colours, but we probably won't know what the impact on residential property is until we get the results for the end of the quarter.

Neil Patterson

16:58 PM, 6th July 2016
About 2 years ago

The Residential property market has a massive supply problem so even worst case scenario I can't see prices taking too big a percentage hit.

PS The stress testing was on the banks remaining solvent if prices fall not really a test on the market as a whole.

Neil Patterson

11:42 AM, 7th July 2016
About 2 years ago

Henderson Global Investors and Columbia Threadneedle Investments have suspended dealing in their property funds.

The Henderson property fund was valued at £3.9billion.


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