Aberdeen gives UK property funds investors pause for thought as 17 per cent exit fee imposed

The news came in an announcement by the investment firm in an update on its Aberdeen UK Property Fund and Aberdeen UK Property Feeder Unit Trust.

The firm explained that it had placed only a temporary, 24 hour period suspension on trading from midday Wednesday 6 July to allow those who had already placed trades to withdraw if they do not want to be impacted by the change in pricing.

A statement from Aberdeen read: “Aberdeen is mindful of the fact that a 17 per cent impact on fund pricing may lead shareholders who have placed redemption orders to re-consider their decision. Accordingly, it has been decided to temporarily suspend trading in the Funds from12 noon on 6 July 2016 and to lift the suspension tomorrow 7 July 2016 at 12 noon in order that shareholders who have placed trades have the option to withdraw that instruction if they wish.”

Orders made after midday 5 July will be subject to the diluted price.

Martin Gilbert, chief executive at Aberdeen Asset Management, said: “Reducing the share price of the Fund reflects the changing market conditions over the past week or so and uncertainty around prices in the property market; sellers requiring liquidity are having to market properties at sometimes significant discounts to their recent valuations.

“Aberdeen’s property fund continues to hold a good level of cash, which permits us to offer these options to investors, but it is imperative that we protect remaining holders by fairly reflecting the impact of short term trading on values provided to redeeming shareholders.

“The property market itself may take some time to find its level but we believe that the same factors that made property a good long-term investment yesterday remain true today.”

Since the ‘Brexit’ vote, there have been six major funds from the £25bn IA property sector to have suspended trading due to liquidity concerns.

The latest is Columbia Threadneedle which confirmied its suspension of its £1.4bn fund, and Henderson confirming suspension of its £3.9bn.

Canada Life has also confirmed it is placing a freeze on £450m worth of property funds.

M&G Investments temporarily suspended trading in the £4.4bn M&G Property Portfolio and its feeder fund, while Edinburgh-based Standard Life Investments stopped trading on its £2.7bn UK Real Estate fund in response to redemption requests, and Aviva Investors suspending trading on its £1.9bn Property Trust.

Aberdeen’s update on its funded concluded: “We recognise that the temporary suspension and dilution adjustment will be inconvenient for some shareholders, but Aberdeen remains absolutely focused on attempting to provide liquidity to shareholders who wish to access it at an appropriate price, while protecting value for remaining shareholders: our aim is to ensure all shareholders are treated fairly.”

Martin Gilbert, chief executive at Aberdeen Asset Management, added: “Our focus has been, and continues to be, treating all customers fairly. We have worked hard to deliver realistic options to clients: redeem at a price which reflects the relatively penal impact of short term trading in the property market, or remain in the fund, protected by the anti-dilutive measures we are taking, and look through to the longer term fair value which we expect to be available in less pressured markets.