Norway's oil fund pares UK property portfolio after Brexit vote

* Downgrades value UK property book by 5 pct

* Says has questions on Brexit impact on freedom of movement

* Fund is major foreign investor in UK

* Repeats will remain a long-term investor in country (Recasts on Brexit, adds deputy CEO quotes, detail)

By Gwladys Fouche

OSLO, Aug 17 (Reuters) - Norway's $893-billion sovereign wealth fund cut the value of its UK property portfolio by 5 percent after Britain's vote to leave the EU, and is concerned at the prospect that Brexit might limit free movement of goods, services and people, it said on Wednesday.

The world's largest sovereign fund is one of Britain's biggest foreign investors, owning shares in most top UK companies and holding $11 billion in government bonds. It co-owns Regent Street, one of London's premier shopping streets.

Conversely, Britain is crucial to the fund as its second-largest investment location after the United States, accounting for 10.2 percent of the fund's value at end-2015.

Property represented 3.1 percent of the fund's total value in the second quarter.

Deputy CEO Trond Grande told a results news conference that the decision to reduce the British property portfolio by 1.9 billion Norwegian crowns ($230 million) had been prompted by external assessors reporting greater uncertainty in their valuation after the June 23 vote.

Some 23 percent of the fund's property investments, or 38 billion crowns ($4.62 billion), are in Britain, and 16 percent in London alone, he said.

The fund reiterated its position that it would remain a long-term investor in Britain, but Grande told Reuters that, on the margin, the fund had "question marks" as to what Brexit would look like, once it has been negotiated.

"For a fund that invests the way we do, anything that is not in favour of free movement of goods, services and people -- that creates frictions in the market place," he said in an interview.

"And if that hampers growth in some shape or form, that will ultimately be to our disadvantage."

One of Britain's largest car insurers, Admiral Group (LSE: ADM.L - news) , said on Wednesday it could move its European business to Ireland (Other OTC: IRLD - news) or elsewhere if British insurers lost their right to sell products across Europe as a consequence of leaving the EU.

The Norwegian fund, which has been built up from North Sea oil and gas revenues and is managed by a unit of the central bank, swung to a positive return in the second quarter, boosted by gains in its fixed-income portfolio.

The fund earned a return of 1.3 percent in the quarter, lagging its benchmark index by 0.1 percentage points. In the first quarter, it booked a loss of 0.6 percent.

The government withdrew 24 billion crowns during the quarter to pay for public expenses at a time of declining oil and gas revenues, against 25 billion crowns in the first quarter. ($1 = 8.2339 Norwegian crowns) (Editing by Kevin Liffey)