Liquidity Crunch Hits UK Real Estate Funds
Funds scramble to stem redemptions post-Brexit vote
BY Caroline Cakebread | July 6, 2016
Some of the biggest real estate funds in the U.K have frozen assets to prevent further redemptions in the wake of Britain’s vote to leave the European Union. Yesterday Bloomberg reported that M&G Investments, Aviva Investors, and Standard Life Investments had halted withdrawals because they don’t have enough cash to immediately repay investors. M&G, which held 7.7% in cash prior to the Brexit vote, was forced to suspend its 4.4 billion pound Property Portfolio. Aviva Investors also froze its 1.8 billion pound property trust while Standard Life stopped trading on its 2.9 billion pound UK real estate fund.
News of more closures came today according to Reuters as Henderson Global Advisors temporarily suspended trading in its 3.9 billion point UK property funds citing “exceptional liquidity pressures” post-Brexit vote.
Canada Life suspended its Canlife Property and Canlife UK property funds calling it a deferral of requests: “The deferral can be for up to six months, enabling the funds to ensure property values reflect market conditions,” it said in a statement reported Reuters. According to Reuters, Aberdeen Asset Management also reported that withdrawals from its 3.2 billion pound UK Property Fund would face a 17 percent dilution levy, and that it would not fulfil later orders. It expects to reopen the fund tomorrow (Thursday).
The turmoil in the UK real estate space is being carefully watched by UK regulators and the banking sector — Britain’s Financial Ombudsman Service called the suspensions “quite troubling.” However, some analysts in the UK have tempered their concerns over the broader impact of the liquidity crunch on Britain’s banking sector.
Clearly, this is one element of the Brexit fallout that bears ongoing scrutiny.