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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Aviva plc    AV.   GB0002162385

AVIVA PLC

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Property fund investors should wait months for cash to avoid exodus - UK regulator

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08/04/2020 | 12:12am EDT

Investors in property funds should wait up to six months before they can get their money back to avoid a stampede for the exit leading to widespread suspensions in rocky markets, Britain's Financial Conduct Authority proposed on Monday.

UK-regulated open-ended property funds offer daily redemptions to entice investors, but nearly all those targeted by Monday's proposal are suspended following market volatility in March due to the pandemic, trapping more than $7.5 billion (5.7 billion pounds) in assets.

Policymakers have warned that property funds should not be viewed like a bank account that can be tapped at will, given they contain "illiquid" assets such as commercial real estate that can take several months to sell even in normal market conditions.

Concerns over daily redemptions began when several property funds were suspended after Britain voted in June 2016 to leave the European Union, as investors pulled out money.

The Financial Conduct Authority (FCA) proposes that property funds publish a "notice period" or irrevocable pre-agreed gap of between 90 and 180 days from the request for a redemption to the return of cash.

It would affect new and existing customers, but also mean that property funds don't have to hold as much cash as they do now, the FCA said.

The public consultation is open until Nov. 3 and the watchdog said it would publish final rules as soon as possible in 2021.

The Association of Real Estate Funds said the consultation was an opportunity to reflect on ensuring that the funds continue to meet the needs of investors.

Investment platform Willis Owen, however, said the change would make property funds unappealing for many investors.

Concerns over daily redemptions also surfaced in March at money market funds, and last year when a flagship equity fund run by then star stockpicker Neil Woodford was suspended.

But these types of funds are mainly domiciled in Luxembourg, Dublin and elsewhere in the EU and are regulated under European Union rules. That makes it hard for the FCA to unilaterally impose stricter requirements without international regulatory consensus.

The FCA and Bank of England are expected to give an update on Thursday on their broader work on illiquid assets and potential systemic risks in open-ended funds.

(Reporting by Huw Jones; Editing by Alison Williams/ Gareth Jones/Susan Fenton)

By Huw Jones

Stocks mentioned in the article
ChangeLast1st jan.
AVIVA PLC 0.32% 279.9 Delayed Quote.-33.37%
M&G PLC 3.56% 151.25 Delayed Quote.-38.39%
STANDARD LIFE ABERDEEN PLC -0.38% 208.9 Delayed Quote.-36.09%
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Financials
Sales 2020 45 913 M 58 496 M 58 496 M
Net income 2020 1 641 M 2 090 M 2 090 M
Net Debt 2020 5 016 M 6 391 M 6 391 M
P/E ratio 2020 6,79x
Yield 2020 9,56%
Capitalization 10 954 M 13 941 M 13 956 M
EV / Sales 2020 0,35x
EV / Sales 2021 0,36x
Nbr of Employees 31 181
Free-Float 97,1%
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Number of Analysts 19
Average target price 374,72 GBX
Last Close Price 279,00 GBX
Spread / Highest target 106%
Spread / Average Target 34,3%
Spread / Lowest Target -37,7%
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NameTitle
Amanda Blanc Chief Executive Officer & Director
Mark George Culmer Non-Executive Chairman
Nitinbhai Babubhai Maganbhai Amin Chief Operating Officer
Jason Michael Windsor CFO, Executive Director & Chief Investment Officer
Michael Mire Independent Non-Executive Director
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