Scottish Equitable closes property fund to withdrawals
by Gill Montia
A slump in commercial property prices has led one of the UK’s largest property funds to halt withdrawals, because of panic selling by small investors.
Scottish Equitable has announced that the 129,000 small investors in its £2 billion property fund will not be able to access their money for up to a year.
Payments being made under existing regular income arrangements will not be affected, nor claims relating to retirement and death.
The fund has invested in London office accommodation and retail centres across the UK.
Aegon UK, Scottish Equitable’s parent company, explains: “Aegon UK has decided to take this step to protect investors following a significant level of customer withdrawals from the UK property fund market.”
The group has attributed the move to: “worldwide phenomena relating to concerns over the US sub-prime mortgage market fallout, rising interest rates and talk of recession”.
At the end of last year, Friends Provident closed its £1.2 billion property fund to withdrawals.
Meanwhile, Scottish Widows is reported to be considering its options and may be restricting customer withdrawals on some of its funds.
The UK commercial property market has been adversely affected by increased borrowing costs and at the same time staff cuts are reducing demand for office space in the City of London.
Predictions of a downturn in consumer spending growth are also making retail shopping developments less attractive to investors.
The Aegon/Scottish Equitable property funds are managed by Morley Fund Management, which also manages the £4 billion Norwich Union Property unit trust, the UK’s biggest property fund.