Aberdeen Asset Management has introduced a 17% redemption penalty on its open-ended UK property fund, which has both retail and institutional investors.
The company said it had made the 鈥渄ilution adjustment鈥� in a bid to continue to provide liquidity in the fund at a price reflecting 鈥渞apidly changing commercial property market conditions鈥�.
Aberdeen said it was 鈥渕indful of the fact that a 17% impact on fund pricing may lead shareholders who have placed redemption orders to reconsider their decision鈥�.
The fund had originally suspended trading for 24 hours 鈥� so 鈥渟hareholders who have placed trades have the option to withdraw that instruction if they wish鈥� 鈥� before extending the deadline to noon on July 11.
The move comes after a among UK property funds, including those managed by , , and Henderson Global Investors.
Aberdeen has adjusted the dealing price to avoid the fund having to sell properties in the market at significant discounts.
The company said it has been in regular contact with its fund鈥檚 independent valuation adviser, gathering evidence on market pricing.
Martin Gilbert, CEO of Aberdeen, said 鈥渟ellers requiring liquidity are having to market properties at sometimes significant discounts to their recent valuations鈥�.
He said it was 鈥渋mperative that we protect remaining holders by fairly reflecting the impact of short-term trading on values provided to redeeming shareholders鈥�.
Aberdeen said the dilution adjustment had been 鈥渋mposed solely to reflect the need to dispose of properties quickly in order to provide liquidity鈥�.
The company said the diluted price is 鈥渘ot a reflection of what we believe is achievable in a stable market where there is not undue pressure to sell assets鈥�.
It said: 鈥淎ccordingly, if future trading in the fund reverts to lower levels, we would likely not apply the dilution adjustment, and the price would revert to a level reflective of longer-term property values.鈥�
Aberdeen said the fund鈥檚 portfolio 鈥渨as positioned defensively鈥� prior to the UK referendum on June 23, sold all holdings in listed property companies and held the proceeds in cash.
Gilbert said: 鈥滱berdeen鈥檚 property fund continues to hold a good level of cash, which permits us to offer these options to investors.鈥�
Gilbert added: 鈥淭he property market itself may take some time to find its level but we believe that the same factors that made property a good long-term investment yesterday remain true today.鈥�
For further analysis on what the suspension of trading property means for institutional investors,
