Aberdeen Asset Management and Legal & General Investment Management (LGIM) have cut the value of their UK commercial real estate funds by in a bid to contain a rush by retail investors to redeem their cash following Brexit.
Aberdeen Asset Management extended the temporary suspension of the £3.2 bn (€3.7 bn) Aberdeen UK Property Fund and the Aberdeen UK Property Feeder Unit Trust to Monday, 11 July. The fund manager said in a statement that the move was 'provide additional time for investors to consider their options in these exceptional circumstances, and further ensures that all customers are treated fairly'.
In addition, Aberdeen AM cut the fair value of the fund by 17%, effectively imposing a levy on investors who decide to cash in their fund units. Martin Gilbert, CEO of Aberdeen Asset Management: 'Feedback regarding our approach has been positive. Investors appreciate that we are continuing to provide liquidity, albeit at a discounted price which reflects current market conditions and the fact that short-term trading in the property market has relatively penal consequences. However, investors who placed trades yesterday have asked for more time to consider whether to withdraw their redemptions which we have now made arrangements to provide them with.'
LGIM is one of the few big fund managers not to close its UK open-ended property fund to redemptions, but it has introduced a 'fair value adjustment' to its £2.3 bn UK Property Fund this week, initially 5%, followed shortly afterwards by an additional 10% cut.
Other major property fund managers, accounting for more than half of the £25 bn open-ended commercial real estate sector for private investors in the UK, have halted trading in the face of a spike in redemption requests from unit holders.
The company said that it was still difficult to predict the exact impact of the vote to leave and subsequent market events on commercial property values. 'In the interests of treating customers fairly, we have made a further fair value adjustment of -10%, so that the underlying property assets of the UK Property Fund and the UK Property Feeder Fund are now subject to a total fair value adjustment of -15%.'
On Monday Standard Life closed its £2.9 bn open-ended real estate fund to redemptions. The following day Aviva Investors suspended its £1.8 bn UK property fund, citing 'extraordinary market circumstances’ that 'have resulted in a lack of immediate liquidity in the Aviva Investors UK Property Trust'. M&G also halted redemptions on its £4.4 bn Property Portfolio, the largest such fund in the UK.
On Wednesday, Henderson, Columbia Threadneedle and Canada Life joined the ranks of UK fund managers who UK open-ended property vehicles have gone into lockdown mode.
