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M&G and Aviva suspend property funds following Brexit vote | |
(about 1 hour later) | |
M&G Investments has followed two other major finance firms and suspended trading in the UK's biggest property fund following the Brexit vote. | |
M&G said withdrawals from its £4.4bn fund had risen markedly because of "high levels of uncertainty in the UK commercial property market" since the outcome of referendum. | |
Earlier, the UK's biggest insurer, Aviva, halted its £1.8bn property fund. | |
Financial regulators have said they will reassess such property funds. | |
Three of the biggest providers of the funds - which offer investors returns from commercial property - have now frozen trading after Standard Life suspended its £2.9bn UK property fund on Monday. | |
Aviva and Standard Life's fund suspensions come amid widespread major falls in property-related shares since the referendum result. | |
Housing firms Berkeley Group, Barratt Developments and Persimmon all fell more than 6% on Tuesday, while shares commercial property firm Land Securities dropped lost 3%. | |
'Dominos' | |
Aviva said customers would have to wait to pull money out of the 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. | "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'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. | 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. | 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." | 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. | 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. | Aviva and Standard Life offer two of the biggest UK property funds. |
There are approximately 50 in total, with fund managers Henderson and Legal & General also big players. |