Aberdeen cuts fund price to limit redemptions

The London-based real estate asset management firm has slashed the fund price by 17 percent for any investor who wants to withdraw capital after a 24 hour temporary suspension is lifted.

London-based real estate asset management firm Aberdeen Asset Management has joined the increasing club of open-ended property fund managers in the UK that are seeking ways to stop the tide of investors from withdrawing their money in the aftermath of the Brexit poll.

In a differentiated approach from that of its peers, Aberdeen Asset Management has halted trading in the Aberdeen UK Property Fund and the Aberdeen UK Property Feeder Unit Trust until 12 noon Monday, July? 11. Following that any investor who seeks withdrawal of its capital from the funds would need to accept a 17 percent price reduction, the firm said in a statement released yesterday.

The action, the firm said, was being taken due to rapidly changing commercial property market conditions and to continue to provide liquidity in the fund at a price reflecting these conditions.

“It is important to note that the dilution adjustment has been imposed solely to reflect the need to dispose of properties quickly in order to provide liquidity. Doing so allows us to protect value for longer term investors and, although today's price incorporates a further fair value adjustment of 2 percent to longer term values, the diluted price is quite distinct from that and not a reflection of what we believe is achievable in a stable market where there is not undue pressure to sell assets,” said the firm, explaining the rationale for the decision.

“Accordingly, 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.”

It further added that those investors who had submitted redemption requests before the suspension announcement would be given the opportunity to cancel or proceed with the trade.

“Shareholders wishing to redeem will do so at a price which is subject to the above dilution adjustment in order to reflect the current market environment and the fact that short term trading in the property market has relatively penal consequences,” the firm said.