AXA restricts access to commercial property funds

by Gill Montia

Story link: AXA restricts access to commercial property funds

AXA is the latest insurance company to restrict redemptions from its Life Property and Pension Property funds.

Around 100,000 investors have been told that they will have to give up to six months’ notice to withdraw savings from the funds, which invest in commercial property.

Certain transactions will not be affected; these include regular withdrawals, death claims and payment of pension benefits on retirement.

Scottish Equitable and Scottish Widows have both taken similar action in the last few weeks and it is estimated that around £8 billion of investors’ money is now retained in property funds with restricted access.

In the case of Scottish Equitable 29,000 small investors in its commercial property fund will not be able to remove their money for up to a year.

Scottish Widows has implemented a 180-day period of waiting for certain transactions involving its Life Property and Pension Property funds.

The changes are aimed at preventing a run on the funds. The prospect of a recession resulting from the credit squeeze has caused commercial property values to plummet in recent months.

Ian Colquhoun, managing director at AXA said: “The commercial property slowdown has resulted in a fall in the liquidity of property funds across the marketplace. The sale of a property can take a long time to complete - on average five months or more - making commercial property funds less liquid than other assets.”

He adds: “The deferral is a sensible and prudent decision, taken as a result of careful assessment as to what is best for the funds investors as a whole. Treating all our customers fairly is our main concern for both for those customers who wish to remain invested in the AXA Property Funds for the longer term as well as those who wish to take money out.”