Standard Life
has been forced to stop retail investors selling out of one of the UK’s largest property funds after rapid cash outflows were sparked by fears over falling real estate values in the week after the UK’s vote to leave the EU.
The £2.9 billion (€3.45 billion) commercial property fund will need to sell real estate to raise cash before any money can be redeemed. It is the UK’s third-largest open-ended property fund for retail investors.
Financial crisis
The last property crash in the UK, just as the financial crisis started in 2007, was preceded by a wave of similar gatings by funds struggling to meet investor demands for cash. They led to firesales of property that added to the pressure on an already falling market.
Last week, Standard Life marked down the value of the buildings its funds own by 5 per cent. The UK's two largest open-ended property funds, run by Henderson and M&G Investments, did the same. The move by the insurance giant is one of the most concrete signs of the Brexit shock filtering from the financial markets into Britain's property sector.
Commercial property
The impact could be wide-ranging since property has become one of the most popular choices for retail investors. In another sign of stress, some closed-ended property trusts are trading at discounts of more than 10 per cent to their net asset value, which reflects fears over the future of commercial property.
Investors in the fund will be unable to redeem their holding for at least 28 days. The asset manager said the suspension will end “as soon as practicable”, and will be reviewed every 28 days. – (Copyright The Financial Times Limited 2016)
