UK property funds with about
18 billion pounds ($23.4 billion) of assets froze withdrawals as investors
sought to dump real estate holdings in the aftermath of Britain’s vote to leave
the European Union (EU).
Henderson Global Investors,
Columbia Threadneedle Investments and Canada Life suspended trading in at least
5.7 billion pounds of funds on Wednesday. Aberdeen Fund Managers Ltd. cut the
value of a property fund by 17 percent and suspended redemption, so that investors who asked for their money back have time to
reconsider. Investors are pulling money from U.K. property funds as
analysts warn that London office values could fall by as much as 20 percent
within three years of the country leaving the EU.
The funds pulled down the
shutters after a wave of investors asked for their money back amid speculation
about a possible drop in commercial property prices in reaction to the result
of the June 23 referendum. That in turn has raised concerns about the outlook
for the broader financial system, given the risk of investors bailing out of
other asset classes in a panic and of lenders to the sector such as banks
suffering fresh balance sheet stress.
Investors pulled money from real estate funds in the lead up
to the vote, depleting cash levels. Standard Life Investments was the first
money manager to halt withdrawals on Monday, followed by Aviva Investors
and M&G Investments. About 24.5 billion pounds is allocated to UK real
estate funds, according to the Investment Association.
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