has stopped redemptions from its UK property fund suspended trading in one of its vehicles.
The freezing of Aviva Investors Property Trust and SLI UK Real Estate Fund comes a week after several funds cut the valuations of their assets by 5% and follows several months of net outflows in the sector.
Aviva Investors said it had 鈥渂een experiencing higher-than-usual volumes of requests to sell units鈥� in the 拢1.8bn (鈧�2.1bn) fund, and that 鈥渃hallenging market conditions in light of investor sentiment regarding the EU referendum鈥� meant the fund鈥檚 cash reserves had become depleted.
A statement said: 鈥淭emporarily suspending dealing in the trust enables us to manage this situation in a fairer and more controlled way.
鈥淏y taking a little longer we hope to sell properties at more competitive prices so that we can act in the best interests of all investors.鈥�
鈥淭his could stem fire-sales, limiting the discounts at which funds would have to sell their holdings鈥�
Eduardo Gorab
, Aviva Investors and Real Estate played down the likelihood of 鈥榟ard landing鈥� in the UK real estate market.
Today, the Bank of England revealed today it was monitoring closely the UK real estate market and the potential 鈥渁mplification鈥� effect of open-ended property funds.
鈥淎lthough they have a range of measures to manage stressed levels of redemptions, these open-ended funds could be forced to sell illiquid assets to meet redemptions if conditions persist beyond funds鈥� notice periods,鈥� the Bank鈥檚 biannual financial stability report said.
鈥淎ny such amplification of market adjustments could affect economic activity by reducing the ability of companies that use commercial real estate as collateral to access finance.鈥�
The freezing of the two funds is likely to raise fears of a repeat of 2008 鈥� when several funds suspended trading and real estate capital values eventually dropped 44% 鈥� but Capital Economics said the news could 鈥渉ave a silver lining鈥�.
Eduardo Gorab, property economist at the consultancy, said it was 鈥渨orrying illustration of how negative property market sentiment has become鈥�, but 鈥渂y limiting redemptions, funds would allow the uncertainty surrounding the UK鈥檚 political and economic environment to recede鈥�.
In a note, Gorab said: 鈥淚n turn, this could stem fire-sales, limiting the discounts at which funds would have to sell their holdings.鈥�
Capital Economics expects monetary policy to help support valuations and is relatively sanguine about the prospects for the UK鈥檚 occupier markets.
鈥淐learly, the uncertainty kicked up by the referendum鈥檚 result has had an adverse impact on sentiment, which has been driving outflows over the last week or two,鈥� Gorab said.
鈥淗owever, if we are right in thinking that occupier and investment markets are well placed to weather the uncertainty, we suspect that fears of a repeat of 2009 are overdone.鈥�
