Friends Fund Withdrawals Blocked
by Stewart Douglas
Story link: Friends Fund Withdrawals Blocked
Insurance group Friends Provident has today announced that investors in its property fund will be unable to gain access to their funds following poor market conditions, as a result of a move to prevent an asset firesale in light of falling property values.
The move today from Friends Provident was designed to prevent investors from withdrawing their funds en masse, which would almost inevitably lead to a collapse of the fund in a similar way to the collapses of hedge funds and sub-prime investment portfolio over the last few months.
Without the imposed restriction, Friends Provident would be required to sell off its commercial property holdings in order to fund the growing liquidity requirements which would ulitmately yield a loss as a result of a recent slump in property prices.
Investors have been told they must keep their money in for six months before trying to withdraw, with a view to ensuring that the fund doesn’t realise a loss on a quick loss in value in the commercial property sector.
Meanwhile Friends have reiterated that their fund will remain open to new investment proposals for the foreseeable future further to the imposed withdrawal restrictions, which it sees as being necessary to weather the current commercial property storm.
As a result of withdrawals from the fund over the last few weeks, Friends Provident have already seen cash reserves slashed by half, leading to the ban on withdrawals announced today to affect the 118,000 investors currently involved in the fund.
It remains to be seen whether the withdrawal restrictions will enable the fund to continue to generate revenues from its commercial property investments, with a view to realising a return on invested capital.