Aviva Investors to gate open-ended RE fund until 2017

Aviva Investors, the asset management business of UK insurer Aviva, has told investors they are likely to be locked into the firm’s £1.6 billion open-ended retail fund for between six months and eight months.

In early July, Aviva Investors became the second company, after Standard Life Investments, to suspend trading in a UK property fund following a rush of redemptions from rattled investors in the wake of the UK’s decision to leave the European Union.

Over the next week, five more firms including Aberdeen Asset Management, M&G Investments, Henderson Global Investors, Columbia Threadneedle and Canada Life, followed suit meaning around 60 percent of the UK commercial property market held in such vehicles was under lock and key.

But after today’s announcement, which came in the form of a note to investors, Aviva Investors is the first of the affected firms to confirm that the decision to gate the fund was not a short-term reactionary measure.

Aberdeen lifted the trading suspension within a week of the gating, but the rest of the affected firms are yet to state how long the measures will remain in place.

In the note sent to clients yesterday, Aviva said its Property Trust fund was likely to continue to stop investors from withdrawing their money until at least the first quarter of next year while its managers attempt to sell commercial properties held by the fund.

Aviva said in the statement: “In order to lift the suspension we need to ensure that we can meet any requests to sell, buy, switch or transfer units which have been held by us during the suspension period. We are committed to ensuring the Trust has a sustainable liquidity position before we allow dealing to resume in order to protect the interests of all investors. Property sales may be more difficult to execute in the current environment due to market uncertainty.”

Laith Khalaf, senior analyst at Bristol-based financial services company Hargreaves Lansdown, said the move was a “big blow” to investors in the Aviva fund.

“The investors are basically now being told they won’t be able to get their money out any time in 2016. The wider question is whether this timeframe applies across the rest of the sector, and property fund investors would no doubt welcome similar guidance from other suspended funds as to when they might open again,” he said. “Once again this highlights the problems of investing in an illiquid asset class via an open-ended fund which offers liquidity on a daily basis, until it’s forced to shut up shop. Being unable to trade in your fund for the best part of a year is more than a minor inconvenience,” Khalaf added.