UPDATE 1-Aviva to close three UK real estate funds hit by pandemic market turmoil

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LONDON, May 20 (Reuters) – Insurer Aviva has announced that in July it will shut down three UK property funds that have been suspended since March last year due to market uncertainty as the pandemic hit the UK economy.

“During this period of economic uncertainty, it has become increasingly difficult to generate positive returns while providing the liquidity necessary to reopen the funds,” Aviva said in a statement released Wednesday evening.

A strategic review of funds that began in January concluded that it would now be in investors’ best interests to liquidate funds and return money to investors in a fair and orderly manner, Aviva said.

The funds will continue to be suspended until they close on July 19. Aviva said it could then take at least 12 to 24 months to sell all assets in order to return the money, given “the current market situation resulting from COVID-19.”

Aviva UK’s leading real estate fund has 366 million pounds ($ 516.90 million) in assets under management, according to Morningstar.

Many funds in the £ 70bn UK real estate fund market were put on hold by fund companies last March after managers said appraisers could no longer be confident in assigning values ​​to real estate businesses such as stores, offices and industrial properties as the coronavirus epidemic accelerated. Most of these funds have now reopened.

“The shortcomings of open-ended funds when it comes to investing in illiquid assets are no secret – and this shutdown is unlikely to be the last,” said Kyle Caldwell of the investment platform, Interactive Investor.

The Financial Conduct Authority has proposed replacing the typical daily redemption notice period for open-ended real estate funds with a notice period of up to six months, in order to avoid blocking funds due to a rush to exit on time. market crisis. ($ 1 = 0.7081 pounds) (Reporting by Huw Jones and Carolyn Cohn; Editing by Susan Fenton and Carmel Crimmins)