Property funds shutter amid market turmoil

Seven asset managers have suspended trading in their property funds due to material uncertainty over the valuation of UK commercial property investments amid current economic turmoil.

Investors in UK property funds run by Aviva Investors, Standard Life, Aberdeen, Columbia Threadneedle, Legal & General and BMO Global Asset Management have been prevented from making withdrawals.

That followed the decision of the Kames Property Income fund and Janus Henderson UK Property fund to suspend deadlings.

The funds invest in a range of commercial property sectors including retail, offices and industrial.

Aviva Investors said the Covid-19 virus had made it difficult to value the property owned by the funds with the same degree of certainty as would otherwise be the case. “As a result, the Standing Independent Valuer has advised us that there is currently ‘material valuation uncertainty’ for all direct property assets within the portfolio,” it said.

The Financial Conduct Authority last year announced new rules due to come into effect in September this year forcing the suspension of a fund where there was material uncertainty over pricing of at least 20% of the assets.

The suspensions come just three months after M&G suspended two of its property funds, citing continued Brexit-related uncertainty and ongoing structural shifts in the UK retail sector, which had prompted unusually high outflows. Dealing in the fund remains suspended.