Trading suspended in the Aviva Investors Property fund

5th July 2016

Aviva Investors has suspended trading in the Aviva Investors Property Trust.

The news follows Standard Life’s decision to suspect trading in its £2.7bn real estate fund yesterday.

Aviva has blamed “extraordinary market circumstances and a lack of liquidity”.

“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 has said its suspension will last at least 28 days and then be reviewed every 28 days.

Laith Khalaf, senior analyst, Hargreaves Lansdown says: “The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It’s probably only a matter of time before we see other funds follow suit.

“The problem these funds face is that it takes time to sell commercial property to meet withdrawals, and the cash buffers built up by the managers have been eroded by investors heading for the door, both in the run up to the EU referendum, and in the aftermath.

“These managers will now be adding to the supply of commercial properties on the market, which is likely to put downward pressure on prices. Foreign investors might be tempted in by the fall in Sterling, but equally they may decide to steer well clear of an economy in limbo.

“Investors in property funds need to focus on the reasons they bought commercial property in the first place, and consider whether they are still intact, because there may be challenging times ahead. Diversification and income are both legitimate reasons for investing in the commercial property funds, but high costs and poor liquidity are two drawbacks which investors need to be willing to shoulder before investing in the sector.”

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