Nervous managers of commercial property funds moved quickly yesterday to stem investor fears of a liquidity crisis after a major sector figure brought down the shutters on its £2billion fund.
Edinburgh-based Aegon UK sent shockwaves through the sector with an announcement that many of the 129,000 investors in its three Scottish Equitable property funds would have to wait for up to one year to cash in their policies.
In an attempt to stop more outflows from the funds – Scottish Equitable Property, Select Reserve and Select Distribution – the company will defer requests for policy surrenders, transfers and switches out of the funds for up to 12 months.
Aegon UK said payments relating to regular income , retirement and death claims will not be affected. It put the move down to problems in the UK property market in recent months as a result of the US subprime crisis, rising money market interest rates and talk of recession.
Returns from UK commercial property have fallen from double figure annual percentage gains to outright declines in the past few months.
Aegon UK funds only have 4 per cent of total assets in the property funds left to pay small investors who want to withdraw. Cash levels are normally kept at 10 per cent. ….
David Scott, of Alan Steel Asset Management, said: "I'm astonished that the move by Scottish Equitable is being compared to Northern Rock. This has no effect on Scottish Equitable's operating business." ….
Quote courtesy of The Scotsman, 19 January 2008.
