11:48 AM, 6th July 2016, About 5 years ago 3
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.
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%.
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