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LONDON—Aviva Investors has stopped investors from pulling money out of a U.K. focused property trust, the second big insurer to suspend a fund after Britain's vote to leave the European Union.

The U.K. fund management arm of the insurer Aviva said on Tuesday that investors have been asking to pull out more money than normal from its £ 1.8 billion ($2.36 billion) Aviva Investors Property Trust following "the extraordinary market circumstances, which are impacting the wider industry."

"We have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect," the firm said in a statement.

"Suspension of dealing will give Aviva Investors greater control in managing cash flows and conducting orderly asset sales to meet our obligations to investors wishing to redeem their holdings."

Aviva's decision comes one day after Standard Life Investments suspended trading in a £ 2.9 billion U.K. commercial real-estate fund. The decision was taken following an increase in redemption requests as a result of uncertainty for the U.K. commercial real-estate market following the EU referendum result," Standard Life Investments said in a statement.

A spokeswoman said the fund will be closed for the foreseeable future to give the fund manager more time to sell assets to raise its cash levels at the best possible price.

It is rare for fund managers to impose such so-called gates on funds, although it became more of an issue after the financial crisis, notably when New Star prevented withdrawals to one of its property funds in late 2008. At that time, fears of falling property prices triggered high levels of requests from investors to pull their money out. Funds were unable to meet these requests.

Analysts and consultants have said it is still too soon to tell the full impact of Brexit on the property sector, but the vote to leave the EU has heightened uncertainty among buyers and sellers. The Bank of England's Financial Stability Report, issued Tuesday, said flows from foreign investors into commercial real estate fell by almost 50% in the first quarter this year.

Numis analysts, in a research note, said that Standard Life's decision to close its property fund to redemptions "is spooking the market."

"Without wishing to be alarmist or sensationalist, Standard Life's decision to close its open-ended property fund to redemptions concerns us," they wrote. "There is clearly fear that prices tomorrow will be substantially lower than pricing today."

Total net outflows from U.K. property rose to £ 360 million in May, according to data from the Investment Association. Numis said it expected significant outflows in June and July.

Mike Prew, an analyst at Jefferies Group LLC, said it was likely more retail property funds will put so-called gates up as investors look to meet high redemptions from investors.

"It is symptomatic of the nature of these open ended funds, taking by definition, cash which is by nature liquid, and putting it into an illiquid asset class," he said.

He added that the market is also facing a "Mexican standoff" following the Brexit vote, in part because sellers are unable to find buyers who will meet their internal valuations. "But the market is cracking quite clearly," he said.

Shares in U.K property companies sold off sharply Tuesday as investors responded to the suspension of trading in a U.K. commercial real-estate fund on Monday.

Land Securities Group PLC and British Land Company PLC, two of the largest real-estate investment trusts, were both down by more than 2.5% just after midday.

Bill Oliver, chief executive of St. Modwen Properties PLC, a residential land and development specialist whose share price was down 8.6% after it reported earnings for the first half of the year Tuesday, said following the referendum result on June 23, "we are now operating in a period of uncertainty in relation to many factors that impact the property market."

"Whilst it is too early to accurately predict how the U.K. property market will respond, until we have more clarity we believe it is appropriate to take a more cautious approach to the delivery of our development strategy," he said

â "Gren Manuel contributed to this article.

WSJ City provides insight and intelligence on how the Brexit vote is impacting the city.

(END) Dow Jones Newswires

July 05, 2016 09:55 ET (13:55 GMT)

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