* Downgrades value UK property book by 5 pct
* Says has questions on Brexit impact on freedom of movement
* Fund is major foreign investor in UK
* Repeats will remain a long-term investor in country (Recasts on Brexit, adds deputy CEO quotes, detail)
By Gwladys Fouche
OSLO, Aug 17 (Reuters) - Norway's $893-billion sovereignwealth fund cut the value of its UK property portfolio by 5percent after Britain's vote to leave the EU, and is concernedat the prospect that Brexit might limit free movement of goods,services and people, it said on Wednesday.
The world's largest sovereign fund is one of Britain'sbiggest foreign investors, owning shares in most top UKcompanies and holding $11 billion in government bonds. Itco-owns Regent Street, one of London's premier shopping streets.
Conversely, Britain is crucial to the fund as itssecond-largest investment location after the United States,accounting for 10.2 percent of the fund's value at end-2015.
Property represented 3.1 percent of the fund's total valuein the second quarter.
Deputy CEO Trond Grande told a results news conference thatthe decision to reduce the British property portfolio by 1.9billion Norwegian crowns ($230 million) had been prompted byexternal assessors reporting greater uncertainty in theirvaluation after the June 23 vote.
Some 23 percent of the fund's property investments, or 38billion crowns ($4.62 billion), are in Britain, and 16 percentin London alone, he said.
The fund reiterated its position that it would remain along-term investor in Britain, but Grande told Reuters that, onthe margin, the fund had "question marks" as to what Brexitwould look like, once it has been negotiated.
"For a fund that invests the way we do, anything that is notin favour of free movement of goods, services and people -- thatcreates frictions in the market place," he said in an interview.
"And if that hampers growth in some shape or form, that willultimately be to our disadvantage."
One of Britain's largest car insurers, Admiral Group, saidon Wednesday it could move its European business to Ireland orelsewhere if British insurers lost their right to sell productsacross Europe as a consequence of leaving the EU.
The Norwegian fund, which has been built up from North Seaoil and gas revenues and is managed by a unit of the centralbank, swung to a positive return in the second quarter, boostedby gains in its fixed-income portfolio.
The fund earned a return of 1.3 percent in the quarter,lagging its benchmark index by 0.1 percentage points. In thefirst quarter, it booked a loss of 0.6 percent.
The government withdrew 24 billion crowns during the quarterto pay for public expenses at a time of declining oil and gasrevenues, against 25 billion crowns in the first quarter. ($1 = 8.2339 Norwegian crowns) (Editing by Kevin Liffey)
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