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Aviva suspends property fund due to 'extraordinary' conditions Aviva suspends property fund due to 'extraordinary' conditions
(about 1 hour later)
The UK's biggest insurer Aviva has become the second firm in two days to suspend trading in a UK property fund following the Brexit vote. The UK's biggest insurer, Aviva, has become the second firm in two days to suspend trading in a UK property fund following the Brexit vote.
Aviva said the freeze would take place immediately due to "extraordinary market circumstances".Aviva said the freeze would take place immediately due to "extraordinary market circumstances".
Standard Life suspended trading in its UK property fund on Monday as investors rushed to withdraw their money following the vote. It comes after Standard Life suspended its £2.9bn UK property fund on Monday as investors rushed to withdraw their money following the vote.
Earlier, financial regulators said they would reassess such property funds.Earlier, financial regulators said they would reassess such property funds.
Andrew Bailey, chief executive of the Financial Conduct Authority, said of the Standard Life suspension: "I think it does point to issues that we need to look at in the design of these things." Aviva and Standard Life's fund suspensions triggered big falls in property-related shares on Tuesday.
His comments were followed by the news that Aviva had also halted trading in its Aviva Investors Property Trust due to a lack of immediate funds. Housing firms Berkeley Group, Barratt Developments and Persimmon have all fallen by about 6% on the FTSE 100, while shares in Land Securities dropped 4%.
An Aviva Investors spokesperson said: "Consequently, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect." 'Dominos falling'
Aviva said customers would have to wait to pull money out of the £1.9bn Aviva Investors Property Trust because of "a lack of immediate liquidity".
"The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote," said Laith Khalaf, an analyst at stockbrokers Hargreaves Lansdown.
"It's probably only a matter of time before we see other funds follow suit."
It takes time to sell commercial property to meet withdrawals, particularly as investors have been heading for the door in the run up to the EU referendum and in the aftermath, he said.
The last time Standard Life stopped investors taking money out of its UK real estate fund was during the financial crisis in late 2008.
Andrew Bailey, chief executive of the Financial Conduct Authority, said of the suspension: "I think it does point to issues that we need to look at in the design of these things."
The Bank of England is also monitoring the behaviour of investors in open-ended commercial property funds, because they see it as one of the risks to UK financial stability.
Aviva and Standard Life offer two of the biggest UK property funds.
There are approximately 50 in total, with fund managers M&G, Henderson and Legal & General also big players.