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L&G adds to pain for UK property fund investors

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image captionOutlook clouded for commercial property as Legal and General cuts value of fund

Confidence in the UK property sector took a further pounding on Thursday after Legal & General made a deeper cut in the value of its property fund.

Meanwhile, Aberdeen Asset Management extended a suspension of its fund.

The latest moves add to a flurry of suspensions this week as fund managers seek to prevent a stampede to the exit following the vote to leave the EU.

Investors are worried that a move to leave the European Union will send commercial property prices tumbling.

L&G has cut its £2.3bn ($2.99bn) UK property fund by a further 10%, following a previous 5% valuation cut.

Including Aberdeen, at least seven property funds have suspended trading following the UK's vote to leave the European Union.

Aberdeen Asset Management extended a suspension of its fund to 11 July on Thursday after announcing a 17% cut to its value.

It initially said on Wednesday it would pause the fund for 24 hours.

image copyrightOli Scarff
image captionInvestments in commercial property take time to exit

Henderson, Canada Life and Threadneedle became the latest on Wednesday to close their doors to traders looking to sell.

That followed similar moves by M&G, Aviva and Standard Life, which have all restricted access to their funds this week.

'Significant discounts'

The large number of investors trying to sell their holdings in the funds is putting pressure on the fund managers to sell properties they own at sharp discounts, said the manager of one suspended fund.

"Sellers requiring liquidity are having to market properties at sometimes significant discounts to their recent valuations," said Martin Gilbert, chief executive at Aberdeen Asset Management.

The vote to leave the EU has led investors to worry that there may be significant falls in commercial property, while the impact on house prices is also being closely watched.

"At this time, it is still difficult to predict the exact impact of the vote to leave and subsequent market events on commercial property values," Legal & General Investment Management said in a statement.

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