UK property funds panic abating as Aberdeen lowers fund dilution figure

The post-Brexit UK property fund panic appears to be abating according to Martin Gilbert, chief executive of Aberdeen Asset Management.

Speaking earlier today as the company announced its decision to lower the dliuation penalties on Aberdeen’s property fund range, Gilbert said that he was confident that the worst was over and looked forward to removing all dilution penalties altogether if this upward trend continues.

Coupled with increased returns and investments into longer term closed-ended property funds, as reported, the news will come as welcome relief to the beleaguered UK property investment industry, still reeling from the ripples caused by the UK’s decision to quit the EU.

“The post-referendum environment now seems to be settling down with thoughts of reducing property holdings being balanced by the fundamental long-term attractions of the asset class,” said Martin Gilbert, chief executive of Aberdeen Asset Management, announcing the reduction of the temporary dilution adjustment applied to the company’s property fund range.

“Our hope is that trading in the funds continues to revert to more normal levels. This should allow us, in time, to remove the dilution adjustment altogether,” he added.

Aberdeen said in statement today that after carefully monitoring the flows in and out of the Aberdeen UK Property fund and the Aberdeen UK Property Feeder Unit Trust funds and the market sentiment within the UK commercial property sector, as well as rebuilding its cash positions, it is now able to reduced the dilution adjustment on the properties within the portfolio.

7.5% uplift

This has resulted in a 7.5% uplift on the funds’ dealing price. A fair value adjustment of 7% continues to be applied to the underlying property portfolio.

Last week, as reported, Aberdeen lifted its temporary suspension of withdrawals from its funds after just seven days in force.

The suspension is one of a series imposed by open-ended property fund companies, 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.

Standard Life, Aviva, Columbia Threadneedle, Canada Life, Henderson and M&G applied restrictions and steep adjustments were added to valuations of assets being taken out of funds by Aberdeen and Legal & General.

Restrictions of flows in or out

Aberdeen has been the first company to make positive moves with many of other companies having around two weeks left on their self-imposed restrictions of flows in or out of the open-ended funds. Its stateement reader that if future trading in the funds continues to revert to more normal levels, then “we would expect to lower further or remove the dilution adjustment”.

However, it added that if redemptions from the funds increase and “cash levels are again depleted the dilution adjustment may rise.”

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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