Aberdeen lifts UK property fund suspension
Aberdeen Fund Managers has today lifted the trading suspension on the Aberdeen UK Property Fund and the Aberdeen UK Property Feeder Unit Trust.
The lifting of the suspension, one of a series of property fund restrictions, affecting more than £13bn in investments that were put in place by a host of investment firms to stem the outflow of cash from UK property-based investments following Brexit, comes after just seven days in force.
Now all property investors are able to withdraw or deposit funds into Aberdeen’s two UK property investment vehicles, although any withdrawals will have an appropriate reduced value given current UK property valuations.
The suspension was originally set to conclude on Monday but, as reported, was extended by the firm till 12 noon today.
Martin Gilbert, chief executive of Aberdeen Asset Management, said that he was pleased that investors will now be able to trade shares in the funds, but warned that investors “should be aware that the price may be adjusted on a daily basis to reflect the funds’ requirement to provide liquidity and the need to protect all investors”.
“The market may take time to find its level but I have no doubt that property will continue to play an important part in investors’ portfolios,” said Gilbert.
Dangers of ‘quick exit’
The news that Aberdeen’s UK Property funds are once again open to business will be seen as a welcome boost by many in the industry, however, Patrick Connolly, an independent financial adviser at UK-based advisory firm Chase De Vere, warned investors of the dangers of looking for a quick exit.
“While this seems like positive news, those looking to exit will still be faced with reduced values on their investments,” said Connolly. “The best approach for investors is to stay calm, take a long-term approach and not to panic and rush towards the exit door.”
The majority of the remaining suspended UK property funds are likely to continue for at least a further three weeks, as most firms involved imposed a 28 day minimum period.
‘Gating’ of UK property investors
This “gating” of UK property investors in funds managed by the likes of Standard Life, Aviva, Columbia Threadneedle, Canada Life, Henderson and M&G and the the steep adjustments applied by Aberdeen and Legal & General has meant, according to Tilney Bestinvest’s Jason Hollands, that much of the UK open-ended commercial property fund sector is therefore in effect, temporarily, no longer “open-ended”.
On Monday, the UK financial regulator, the Financial Conduct Authority (FCA) issued guidance for property investment firms after the decision by a number of funds, as reported, to announce the temporary suspension of trading in their property portfolios and feeder funds last week, affecting an estimated £13bn of investments.
The FCA said in a statement that the guidance is necessary to remind fund managers of their obligations to investors and outlines the FCA’s expectations in relation to the suspension of dealings in their funds.
Aberdeen added that with the suspension removed, investors are now able to submit trades after 12 noon on 13 July 2016 but at a diluted price that reflects the current market environment and the fact that short-term sales in the property market have “relatively penal consequences”.
Aberdeen said in its statement today that it is important for investors to note that the anti-dilutive measures that it has put in place have been imposed “solely to reflect the need to dispose of properties in order to provide liquidity”.
The statement read: “Doing so allows us to protect value for longer-term investors and, although today’s price also incorporates a fair value adjustment of 7% on property holdings, the diluted price is quite distinct from that and not a reflection of what we believe is currently achievable in the absence of undue pressure to sell properties.”
The firm concluded that if future trading in the fund reverts to lower levels, it would expect to lower or remove the dilution adjustment, and the price would then revert to a level reflective of longer-term property values.