Standard Life Investments suspended trading in its 2.9 billion-pound ($3.9 billion) U.K. Real Estate fund on Monday after Britain’s vote to leave the European Union triggered a surge in redemptions.
The fund, which invests in a mix of prime commercial real estate assets, was halted at midday and the decision will be reviewed every 28 days, the Edinburgh, Scotland-based fund manager said in a statement. Standard Life adjusted the value of the underlying assets by 5 percent last week.
“The risk is that it’s the thin end of the wedge and we have more property funds doing this sort of thing in the weeks and months to come,” said Laith Khalaf, a senior analyst at investment firm Hargreaves Lansdown. “If Standard Life is experiencing outflows, other managers will be suffering the similar fate and may have to take similar action.”
Investors are pulling money as
industry commentators warn that London office values could fall by as much as 20 percent within three years of the country leaving the European Union. Khalaf estimated that about 25 billion pounds is invested in property sector funds by U.K. investors, including those that invest in stocks.
Redemption Requests
“The decision was taken following an increase in redemption requests as a result of uncertainty for the U.K. commercial real estate market,” Standard Life said in a statement Monday. “The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns.”
The company said the property fund still offered a stable and secure income return with a distribution yield of about 3.86 percent and that the selling process had to be controlled to protect investors. The fund held a cash position of more than 13 percent as of May 31.
Standard Life was among a number of asset managers, including Aberdeen Asset Management Plc and M&G Investments, that last week adjusted the vale of the underlying property assets in some of their funds in the wake of Brexit.
A spokesman for Aberdeen said the company had no plans to suspend trading in
its funds, saying that redemptions had started to slow and its U.K. property
fund held about 20 percent in cash.