London: Aviva Investors suspended trading in a £1.8 billion ($2.4 billion) real estate investment fund, after Standard Life Investments froze its fund on Monday, as investors demanded their money back in the wake of Britain’s vote to leave the European Union.

The money manager halted the Aviva Investors Property Trust following a “lack of immediate liquidity," according to a statement on Tuesday. “We have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect."

Investors are pulling money as industry commentators warn that London office values could fall by as much as 20% within three years of the country leaving the EU. During the financial crisis of 2007 and 2008, real estate funds were forced to freeze operations after withdrawals surged, contributing to a property-market slump that saw values drop more than 40% from their peak in the UK.

“The dominoes are starting to fall in the UK commercial property market," said Laith Khalaf, a senior analyst at Hargreaves Lansdown. “The problem these funds face is that it takes time to sell commercial property to meet withdrawals, and the cash buffers built up by the managers have been eroded by investors heading for the door."

Stocks decline

Land Securities Group Plc paced a sell-off in property stocks, falling 4% as of 1:23pm in London trading. Asset managers also declined, led by Aberdeen Asset Management Plc, which was down 5.8%. Standard life, whose fund had £2.9 billion of assets, is among a number of firms, including Aberdeen, Henderson Group Plc, Legal & General Group Plc and M&G Investments who last week adjusted the value of assets in their property funds in the wake of Brexit.

“The drop-off in inflows and then redemptions forces these funds to eat into their liquidity buffer," much of which is held in real estate investment trust shares, Mike Prew, an analyst at Jefferies LLC, said in a note to clients on Tuesday. The FTSE 350 REIT Index has fallen 20% since the day of the Brexit vote.

UK challenger banks that specialize in real estate lending also tumbled. Both Shawbrook Group Plc and Virgin Money Holdings UK Plc were down more than 12.5%, the biggest decliners on the FTSE 350 Index.

A spokesman for Aberdeen said the company has no plans to suspend trading in its funds, saying that redemptions have started to slow and its UK property fund holds about 20% in cash. Officials at Henderson and M&G declined to comment. L&G said its UK property fund is “well positioned" in terms of liquidity and asset management.

Standard Life said Monday it will review the suspension of its fund, which invests in a mix of prime commercial real estate assets, every 28 days. The company last week adjusted the value of the underlying assets by 5%. The fund held a cash position of more than 13% as of 31 May.

“The potential impact of a high-profile liquid fund suspending redemptions shouldn’t be underestimated, particularly given the uncertain environment," said Emma Bewley, head of funds at Connection Capital in London. “While asset managers will seek to avoid suspending redemptions, they may have to use additional liquidity facilities." Bloomberg