Aviva Investors, the asset management business of UK insurer Aviva, has become the second firm in as many days to suspend trading in a UK property fund since the Brexit vote.
The firm blamed “extraordinary market circumstances” which it said was impacting the wider industry and had resulted in a lack of immediate liquidity in the £1.8 billion fund ($2.34 billion; €2.1 billion), the Aviva Investors Property Trust, meaning customers would have to wait to withdraw their money.
A spokesman for Aviva Investors confirmed the suspension was implemented with immediate to “safeguard the interests” of its investors. “Suspension of dealing will give Aviva Investors greater control in managing cashflows and conducting orderly asset sales in order to meet our obligations to investors wishing to redeem their holdings,” said a spokesman for the firm.
The decision comes on the heels of the decision by Standard Life Investments (SLI), the asset management arm of Edinburgh-based insurer Standard life, suspended trading on its £2.9 billion ($3.8 million; €3.4 billion) UK-focused real estate fund on Monday (July 4).
The decision by SLI also came after a rapid increase in redemption requests by investors. The firm, which said the suspension was implemented to protect the interests of all investors in the fund, confirmed it would review the decision 28 days from Monday, and every subsequent 28 days after that.
Laith Khalaf, an analyst at Bristol-based financial services firm Hargreaves Lansdown, said today’s developments could just be the beginning.
“The dominos are starting to fall in the UK commercial property market,” he said. “As yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It's probably only a matter of time before we see other funds follow suit.”
The fund suspensions have triggered significant drops in property-related shares today. Housing firms Taylor Wimpey, Persimmon, Barratt Developments and Berkeley Homes have all fallen by between 6 percent and 8 percent on the FTSE 100.
Aviva shares today dropped by almost 3 percent, while SLI fell by 4.5 percent.
Following news of the trading suspensions and share drops, Chicago-based JLL, one of the largest commercial real estate brokers active in the UK, confirmed that 11 percent of its pipeline of UK deals have been withdrawn in the immediate aftermath of the Brexit vote.