Aberdeen Asset Management has become the 7th property investment fund to effectively suspend payouts after the Brexit vote in Britain. As David Pollard reports, there are fears more funds could follow with big implications.
It's an unlucky number for some - seven UK property funds now suspended or close to it, leaving over 18 billion pounds of investor assets frozen. And could get unluckier still - if more of the UK's 50 or so similar funds close the door on withdrawals - as Brexit uncertainty takes hold. SOUNDBITE (English) PANMURE GORDON MARKET COMMENTATOR, DAVID BUIK, SAYING: "There is this concern, that we could enter recession by the first quarter of 2017, and if we are in a flux of having seen major money no longer coming from overseas investors into commercial property, which Mark Carney has told us is down in turn of turnover is down 50% since the first quarter, that is very significant." The Bank of England and Governor Carney see commercial property as a key risk to UK financial stability. The risk for investors is that they can't get their money out - at least for now. Aberdeen Asset Management is the latest to act: its investors would face a 17 per cent levy for withdrawals, it said on Wednesday - and later orders would not be fulfilled - although it still hoped to reopen the fund. Among those closing are Henderson, M&G and Standard Life. While others are cutting the value of their funds - like L&G - or raising redemption charges - like BlackRock. Amid a deepening concern over the knock-on effect on other asset classes - including residential property. SOUNDBITE (English) PANMURE GORDON MARKET COMMENTATOR, DAVID BUIK, SAYING: "If there is going to be fall in the value of properties, then of course this puts the banks ... under extreme duress, because the likelihood of negative equity returning cannot be ruled out and puts great strain on the banks for impairment charges and potential losses." UK house prices in the run-up to the Brexit vote grew at their slowest rate in nearly a year, according to the latest reading from Halifax. If not a crisis yet, some of the more pessimistic observers are calling it the early signs of one.