A spokesperson 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.”
Yesterday, SLI suspended trading in its Standard Life Investments UK Real Estate Fund, which it said was due to uncertainty in the UK commercial property market, following the EU referendum result.
Rapid cash outflows were sparked by fears over falling real estate values in the week after the UK’s vote to leave the EU.
A Standard Life spokesperson said: “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 fund invests in a diverse mix of prime commercial real estate assets from across the office, retail and industrial and other sectors.
SLI added: “The suspension will end as soon as practicable, and will be formally reviewed at least every 28 days.”
The £2.9bn commercial property fund will need to sell real estate to raise cash before any money can be redeemed. It is the UK’s third largest open-ended property fund for retail investors in a notoriously illiquid sector making it hard for managers to meet sudden investor demands for cash.
The last property crash in the UK, just as the financial crisis started in 2007, was preceded by a wave of similar gatings by funds, which led to fire sales of property putting pressure on an already falling market.
Mark Farmer, chief executive of Cast real estate and contruction consultancy commented: “The suspension doesn’t surprise me. It has parallels with the financial crash of 2008.
“There may be some contagion as a result, with people pulling out of other real estate funds.”
He added: “I’m not sure that property investment is a bad call at the moment, though. Some is pretty sound and I’d prefer it to equity markets.
“Residential rental is a pretty safe bet at the moment. There may be a move out of commercial property into this sector.”