(Adds background, detail, quote, fund size) LONDON, May 20 (Reuters) - Insurer Aviva said it will close three UK property funds in July that have been suspended since March last year due to market uncertainty as the pandemic hit Britain’s economy. “During this period of economic uncertainty, it has become increasingly challenging to generate positive returns whilst also providing the necessary liquidity to re-open the funds,” Aviva said in a statement on its website late on Wednesday. A strategic review of the funds that began in January has concluded that it would now be in investors’ interests to wind up the funds and return cash to investors in a fair and orderly manner, Aviva said. The funds will continue to be suspended until they are closed on July 19. Aviva said it could then take at least 12-24 months to sell all the assets in order to return the cash, given “the current market situation arising from COVID-19”. The main Aviva UK property fund has 366 million pounds ($516.90 million) in assets under management, according to Morningstar. Many funds in the 70 billion pound UK property fund market were suspended by fund houses last March after managers said valuers could no longer be confident in assigning values to commercial real estate such as shops, offices and industrial property as the coronavirus outbreak gathered pace. Most of those funds have now reopened. “The shortcomings of open-ended funds when it comes to investing in illiquid assets is no secret – and this closure is unlikely to be the last,” said Kyle Caldwell of investment platform, interactive investor. The Financial Conduct Authority has proposed replacing the typical daily redemption notice period for open-ended property funds with notice of up to six months, to prevent funds locking up due to a stampede for the exit in times of market crisis. ($1 = 0.7081 pounds) (Reporting by Huw Jones and Carolyn Cohn; Editing by Susan Fenton and Carmel Crimmins) Our Standards: The Thomson Reuters Trust Principles.