Aviva Europe fund hit by redemptions

An open-ended property fund managed by UK insurance group Aviva has been forced to suspend dealings following rapid increases in redemptions. The UK fund manager's problems mirror those of German open-ended funds.

Aviva Investors, the investment management division of the UK insurer, has temporarily suspended dealings in an open-ended European property vehicle.

The company said a decision to halt activities at the European Property Fund was taken in order to safeguard investor interests.

It said dealings had been suspended because of a lack of liquidity due to a rapid increase in redemptions levels over the last few weeks as well as weaker market conditions which have lengthened the sale time for commercial properties.

The problems mean that investors will not be allowed to make further redemptions until the suspension is lifted. In a statement, the company said the fund's liquidity position would have to improve sufficiently to meet such requests. “Redemption instructions will be held on file and executed on the first dealing day following the end of the suspension period,” it explained.

Ben Stirling, managing director of Continental Europe Real Estate, said: “Weaker market conditions have led to an immediate lack of liquidity in the fund. The European commercial property market has slowed and it is taking longer to turn properties into cash at acceptable prices.” He added that at the same time redemptions have been running at high levels. “As we have seen in the last weeks, a number of European real estate funds have suspended in this difficult market.”

German open-ended funds have most notably been suffering from the weaker market sentiment. KanAM, for example, halted further redemptions from its KanAm US-grundinvest fund at the end of October due to liquidity concerns, and Morgan Stanley Real Estate Investment GmbH followed suit. The Frankfurt-based branch of Morgan Stanley’s real estate management business said it had put a temporarily ban on redemtions after “major, unanticipated withdrawals”.