Asset manager cuts levy on exiting UK property funds

Aberdeen says charge falls by 10 per cent as tide of UK redemptions seems to be slowing although others say commercial property may be at beginning of downturn.

A crane is seen on a construction site in London. Post-Brexit, investor demand cooled for UK property. Neil Hall/Reuters

Aberdeen Asset Management 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 per cent.

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 past 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,” said the Aberdeen chief executive Martin Gilbert.

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 EU, in common with several other property funds.

Andrew Bailey, the chief executive of the UK 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,” Mr Bailey said.

More than £18 billion (Dh87.31bn) 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.

Investment demand for British commercial property dropped by the largest amount on record after last month’s vote to leave the EU, according to a survey from the Royal Institution of Chartered Surveyors (Rics) on Thursday.

Its investment enquiries balance fell in the second quarter to minus 16 from plus 25. The drop was led by London, where investment demand fell to its lowest level since 2009.

The survey will be of interest to Bank of England policymakers. Earlier this month, the governor Mark Carney warned the financial risks of Brexit were materialising after valuations in the commercial property sector fell sharply, prompting some investment funds to freeze their funds.

Rics said more than a third of surveyors – the largest share of respondents – now feel the commercial property market is in the early stages of a downturn.

“Political and economic uncertainty in the aftermath of the referendum result has clearly dampened sentiment in the commercial property market, with the tone becoming visibly more cautious right across the UK,” said the Rics senior economist Jeff Matsu said.

“Whether or not the sharp deterioration in the Rics survey data is a kneejerk reaction that will unwind as the result is digested, or the start of a more prolonged downturn, remains to be seen.”

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