The malaise in the United Kingdom’s real estate sector is spreading following the country’s shock vote to leave the European Union, with two more property trading funds — Aviva Investors and M&G Investments — announcing temporary suspension of trading Tuesday. The move, along with a similar announcement from Standard Life Investments on Monday, takes the total of frozen U.K. property funds to over 9 billion pounds (about $12 billion) this week alone.
Asset managers say the moves are to protect their investors. If investors decided to withdraw their money from the funds, the fund managers would be forced to liquidate assets to raise the cash. A quick-fire sale would not assuredly get the best price for the properties, and the sudden increased availability of properties in the market would also drive down their prices, creating a spiral effect. That, in turn, would hurt the fund and the investors who chose to remain with it.