The Aegon funds were suspended in March 2020, in line with much of the UK property fund market, due to uncertainty over market valuations as a result of the COVID-19 pandemic.
"It has proved increasingly challenging to raise sufficient liquidity whilst also ensuring that continuing investors have a representative and well-balanced portfolio," the fund manager said in a statement.
"In order to ensure all investors are treated fairly, Aegon AM has decided to take steps to close the funds and return the proceeds to investors as quickly as possible, in a fair and orderly manner."
The Aegon Property Income fund had 380 million pounds ($530.7 million) in assets under management and the feeder fund's AUM was 150 million pounds, according to Morningstar.
Aegon said in a separate fact sheet it hoped to start distributing around 40% of the money locked up in the funds to investors in the third quarter. It would take between 12 and 24 months to complete the distribution, Aegon added.
Most suspended property funds have reopened after real estate markets stabilised late last year.
But Aviva Investors also closed its UK property funds in May, citing economic uncertainty.
The Financial Conduct Authority has proposed replacing the typical daily redemption notice period for open-ended property funds with notice of up to six months to prevent funds locking up due to a stampede for the exit in times of market crisis.
Such funds are typically owned by retail investors.
"With regulatory changes pending and an uncertain outlook for commercial real estate... times are only going to get tougher for property funds," said Oli Creasey, property research analyst at Quilter Cheviot.
($1 = 0.7161 pounds)
(Reporting by Carolyn Cohn; Editing by Karin Strohecker and Jan Harvey)
