Aviva And M&G Suspend Property Fund Dealing

M&G Investments has joined Aviva Investors in today suspending dealing in property funds following the EU referendum result.

Aviva halted its £1.8bn UK property trust blaming "extraordinary market circumstances" just a day after Standard Life Investments suspended its £2.9bn UK real estate fund.

That followed a rapid increase in investors trying to liquidate – cash in – their holdings.

One expert said it was only a matter of time before other funds followed suit.

A spokesman for Aviva Investors said: "The extraordinary market circumstances, which are impacting the wider industry, have resulted in a lack of immediate liquidity in the Aviva Investors Property Trust.

"Consequently, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect."

M&G (Shanghai: 603899.SS - news) - part of Prudential (Amsterdam: PD8.AS - news) - said of its £4.4bn fund: "Redemptions have now reached a point where M&G believes it can best protect the interests of the funds’ shareholders by seeking a temporary suspension in trading.

"This will allow the fund manager time to raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values."

It added that it would review the suspension every 28 days.

The announcements came as listed real estate funds fell sharply in Tuesday trading.

Housebuilders and insurers felt the bulk of the pain - with Aviva (Other OTC: AIVAF - news) down almost 4% and Standard Life (LSE: SL.L - news) losing 5.2%.

Meanwhile, the Bank of England's Financial Stability Report pointed to the risks facing the commercial property market after the Brexit vote.

Governor Mark Carney said foreign flows of capital into the sector were down 50% in the first quarter of 2016 while transaction volumes had fallen further during the second quarter and share prices of real estate investment trusts were down sharply after the referendum.

Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) stockbrokers, said: "The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote.

"It's probably only a matter of time before we see other funds follow suit.

"The problem these funds face is that it takes time to sell commercial property to meet withdrawals, and the cash buffers built up by the managers have been eroded by investors heading for the door, both in the run-up to the EU referendum, and in the aftermath."

In a separate part of the property market, house builders have seen sharp share price falls in the wake of the poll result.

However Jeff Fairburn, the chief executive of Charles Church owner Persimmon (Other OTC: PSMMF - news) said in a trading update that the UK housing market had steadied after some deal cancellations following the referendum.

"There is some uncertainty among people about what’s happened and that’s natural, but we’ve not seen that translate to any significant change in our trading," he said.