Aberdeen cuts dilution adjustment on UK property funds

* Dilution levy cut from 17 to 7 pct

* Fair value adjustment of 7 pct in place

* Move follows slew of funds frozen post-Brexit (Adds comment from CEO and regulator, details)

LONDON, July 21 (Reuters) - Aberdeen Asset Management (Other OTC: ABDNF - news) has reduced the levy on withdrawing from its UK property funds, it said on Thursday, as a surge of investor redemption requests following Britain's vote to leave the European Union began to slow.

Abdereen said it has reduced the dilution adjustment on its UK Property fund and UK Property Feeder Unit Trust from 17 to 7 percent.

The move reduces the hit that investors take for selling out of the fund. Aberdeen said the change reflects a reduction in the volume of redemptions by investors in the last week and a rise in its cash balances after a number of property sales.

"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," Aberdeen Chief Executive Martin Gilbert said.

The asset manager lifted the suspension on investors withdrawing money from the funds on July 13, after freezing exits in the wake of Britain's vote to leave the European Union, in common with several other property funds.

Andrew Bailey, chief executive of the Financial Conduct Authority which regulates property funds, told Britain's parliament on Wednesday there was a need to avoid fire sales of property to meet redemption requests from investors.

"The latest evidence we have is that the position is stabilising, the pattern of withdrawal requests versus investment requests has gone much more into balance," Bailey said.

More than 18 billion pounds in UK commercial property funds aimed at retail investors were frozen in early July following a tide of redemption requests.

Aberdeen said it applied the dilution adjustment to reflect the fact that properties would have to be sold for below market value in order to provide liquidity. ($1 = 0.7572 pounds) (Reporting By Lawrence White and Huw Jones; Editing by Rachel Armstrong (LSE: 32414833.L - news) and Sinead Cruise)