Aberdeen again extends suspension on trading as penalties stem investors’ rush for the door

The firm also announced that it is to extend the temporary suspension on trading on its UK Property Fund and the Aberdeen UK Property Feeder Unit Trust by a further two days to run until 12 noon on Wednesday.

Aberdeen said the move will “provide additional time for investors to consider their options in these exceptional circumstances, and further ensures that all customers are treated fairly”.

Following today’s extension, investors will have until midday on Wednesday to cancel or amend any redemption requests. Those who do not request a cancellation will have their redemptions processed on Wednesday at the diluted dealing price.

Aberdeen advised that any remaining investors who submitted redemption requests between 12 noon on 5 July and 12 noon on 6 July 2016 and would like to amend or cancel the trade should urgently contact their intermediary or platform.

Last week the property fund announced it was increasing exit fees to 17 per cent as funds across the property sector face liquidity concerns in the aftermath of the UK’s vote to leave the European Union.

Aberdeen chief executive, Martin Gilbert, said: “Following the application of the dilution adjustment the vast majority of trades submitted prior to temporary suspension last Wednesday have been reviewed and, in many cases, have been withdrawn by investors.”

He added: “Whilst we are in a good position to lift the suspension today, given the exceptional circumstances and specific requests we have received from two large platforms, we believe it is appropriate to allow a further two days for remaining investors to be contacted in the interests of treating all customers fairly.”

Gilbert offered thanks to distributors and intermediaries “who have worked tirelessly with us to ensure investors are aware of the actions we’ve taken and of the options they have”.

With more than half the £25bn property fund sector now suspended, the Financial Conduct Authority (FCA) has issued guidance after the decision by funds to temporarily suspension trading in their property portfolios and feeder funds, with the City watchdog’ reminding managers of their obligations to investors and the FCA’s expectations in relation to the suspension of dealings in their funds.

FCA Chief Executive Andrew Bailey said at the Financial Stability Report press conference on Tuesday 5 July, the ability to suspend is built into the structure of these funds.

The FCA said fund managers have a duty to act in the best interests of all investors and therefore must consider how to ensure the on-going fair treatment of all investors in their funds in the context of the current market conditions.

In a statement the FCA said: “Fund managers have a range of tools available to manage their funds through periods of market disruption or when specific events take place to ensure the best interests of all investors are safeguarded.

“The FCA expects all fund managers to understand fully their duties and responsibilities, as well as the tools they have in relation to all of the funds they manage, which will largely depend on the terms set out in that fund’s prospectus and the instrument constituting the fund. Further, the FCA expects them to have a clear understanding of how and when such tools might be used.

“It is the duty of the fund manager to ensure that assets are valued fairly and accurately and to ensure that any subscriptions or redemptions of units take place at a fair price. Failure to do so may lead to some investors gaining at the expense of other investors in the same fund.

“If a fund has to dispose of underlying assets in order to meet an unusually high volume of redemption requests, the manager must ensure these disposals are carried out in a way that does not disadvantage investors who remain in the fund or are newly investing in it.

“In exceptional circumstances, fund managers should consider whether it would be in investors’ best interests to suspend dealing in a fund or range of funds. We request that managers of authorised funds contact us in advance of any proposed suspension.”

Where fund managers have chosen to temporarily suspend dealings in funds, the FCA said they will need to consider when to resume dealings in the interest of investors, with funds holding a large proportion of assets that may be, in certain circumstances, illiquid or hard to value such as commercial property may consider that the suspension should be lifted and investors given the opportunity to redeem at a revised valuation of the units in the fund. This redemption price might reflect the price at which illiquid assets can be realised in a shorter than usual timeframe, the FCA said.

In these circumstances, the watchdog warned that fund managers should ensure that:

Aberdeen said orders for subscriptions and redemptions in the Funds placed between 12 noonon 5 July and before 12 noon on 6 July 2016 will now be processed at 12 noon on13 July 2016 at the diluted price unless withdrawn before the next valuation point (12 noon on 13 July 2016). Orders placed between 12 noon on 6 July 2016 and the next valuation point (12 noon on 13 July 2016) will not be accepted.

Shareholders wishing to redeem will do so at a price which is subject to the dilution adjustment in order to reflect the current market environment and the fact that short term trading in the property market has relatively penal consequences.

Those investors who submitted redemption requests between 12 noon on 5 July and before 12 noon on 6 July 2016 will have the opportunity to cancel or proceed with the trade. For the avoidance of doubt, if investors do not specifically instruct the cancellation of their redemption request, such redemptions will be processed at the diluted dealing price on 13 July 2016.

The Funds remain closed to new subscriptions and redemptions until after noon,13 July 2016.

Columbia Threadneedle Investments and Henderson Global Investors yesterday suspending dealing in property funds worth £5.3bn.

M&G Investments temporarily suspended trading in the £4.4bn M&G Property Portfolio and its feeder fund, while Standard Life Iinvestments stopped trading on its £2.7bn UK Real Estate fund in response to redemption requests, and Aviva Investors suspending trading on its £1.9bn Property Trust.

This morning Kames announced it has waived dealing costs for new investors to encourage investment in the fund.

Aberdeen AM has one of the highest levels of liquidity compared to similar funds and had sold all quoted property investments in the week prior to the UK’s vote to leave the European Union.