Aberdeen relaxes fund rules as property market settles

Aberdeen Asset Management has reduced the penalty imposed on investors who wanted to withdraw their money from its property fund following last month's Brexit vote.

Analysts said 'some measure of normality' was returning to the property fund sector. Picture: Raymond Keith
Analysts said 'some measure of normality' was returning to the property fund sector. Picture: Raymond Keith

Along with a number of other property funds, Aberdeen increased the dilution levy on withdrawals from its fund to reflect a fall in the prices it would be able to achieve for selling property quickly to pay back investors. The move came amid concerns of a flood of investors trying to withdraw cash.

The withdrawal penalty was increased to 19 per cent but has now been put back to the 1.25 per cent level it stood at before the referendum, although a “fair value adjustment” of 7 per cent is still being applied to reflect an expected fall in commercial property values in the wake of the vote.

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Aberdeen lifts suspension on property fund trading

Laith Khalaf of Hargreaves Lansdown said the reduction was a sign that things were getting back to “some measure of normality in the UK property fund sector”.

“However, the price movements of property funds over the past month have been quite breath-taking, particularly when you consider many investors will have chosen property as a safer alternative to the stock market,” he said.

“While things appear to be calming down for property funds, dilution levies are entirely dependent on fund flows and applied without prior notice, so investors are still playing lucky dip when they buy or sell one of these funds at the moment.”

In a separate development, Aberdeen said it had raised £115 million from pension funds to invest in the UK private rented sector (PRS) via an investment club. The move is the latest sign of growing institutional interest in PRS in the UK. Scotland’s Sigma Capital and Lomond Capital are among the key players in the sector.

Edinburgh-based Ed Crockett, who leads Aberdeen’s UK residential team, said: “Aberdeen already manages over £350m of residential property assets in the UK. We see this as an area of real interest for investors offering a stable, durable income stream with strong demographic pressure driving a fundamental change in the approach to the sector.”