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Aviva Investors has called time on a commercial property fund for small-time investors and is planning to liquidate its assets.
The fund manager wrote to investors in the £367M Aviva Investors UK Property Fund Tuesday to tell them it is planning to close the fund and give them their money back, Wealth Manager reported. Investors are supposed to be able to take their money out whenever they like, but the fund has been closed to redemptions since March last year after worries about the impact of the coronavirus caused a run on its cash reserves.
The fund had been trying to sell assets to build up cash and return money to investors that want to exit so it can reopen again, but Aviva has decided to shut it down entirely. Other funds in a similar position have reopened to allow investors to exit over the past few months — M&G opened its fund last week.
It is “in investors’ interests to wind-up the funds and return cash to investors in a fair and orderly manner,” Aviva said in a letter to investors.
“This review, combined with forecast redemption levels upon reopening, concluded that the funds’ ability to fully benefit from the economies of scale and the diversification of investments that collective investment schemes normally bring would soon be limited.”
The decline in the size of the fund has been rapid as it looked to sell assets to pay investors back. In 2016, before the Brexit vote, the fund had £1.8B of assets. But worries about the Brexit effect on London caused investors to withdraw cash and Aviva had to sell assets to meet the repayments. That reduced the size of the fund to £900M, and the coronavirus has precipitated the need for sales that dropped the fund to £367M.
The Financial Conduct Authority is reviewing how to get around the tensions inherent in a fund that allows investors to withdraw money daily, but has to sell big illiquid assets like commercial property in order to meet withdrawal requests.
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