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Four more U.K. property funds froze withdrawals as investors sought to dump real estate holdings in the aftermath of Britain’s vote to leave the European Union.
Henderson Global Investors, Columbia Threadneedle Investments and Canada Life suspended trading in at least 5.7 billion pounds ($7.4 billion) of funds. Aberdeen Fund Managers Ltd. cut the value of a property fund by 17 percent and briefly halted redemptions so that investors who asked for their money back have time to reconsider.
“The problem with open-ended funds is you do start to have panic selling, so you really have no choice but to suspend the fund,” said Jason Hollands, managing director at investment firm Tilney Bestinvest. “There’s an inevitability to this now.”
“Shareholders wishing to redeem will do so at a price which is subject to the above dilution adjustment in order to reflect the current market environment and the fact that short term trading in the property market has relatively penal consequences,” the firm said.
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. During the financial crisis of 2007 and 2008, real-estate funds were similarly hit by redemptions and forced to halt withdrawals, contributing to a slump in property prices that saw values drop more than 40 percent from their peak in Britain.
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. Today’s suspensions take the total number of real estate assets frozen by money managers since Monday to more than 15 billion pounds, according to the most recent data. About 24.5 billion pounds is allocated to U.K. real estate funds, according to the Investment Association.
The pound fell as much as 1.7 percent to $1.2798, the lowest since 1985, and was down 0.7 percent at $1.2931 as of 5 p.m. in New York. Cable is a term for this sterling-dollar rate. The Bloomberg British Pound Index, which measures the U.K. currency against major peers, has tumbled 13 percent since the referendum, and dropped to the lowest since the data started in 2004.
This article originally apperaed in Bloomberg-Markets. Read full article here: ‘Panic’ Withdrawals Halt Four More U.K. Property Fundsnews