The Wall Street Journal-20080122-Credit Crunch- Commercial-Property Funds Hit in U-K-
Return to: The_Wall_Street_Journal-20080122
Credit Crunch: Commercial-Property Funds Hit in U.K.
LONDON -- Investors in the U.K. are looking to cash out of some high-profile commercial-property funds in what appears to be the latest sign of caution tied to the global credit crisis. And the funds are responding by pulling their doors closed to avoid a fire sale.
Scottish Widows said it is freezing payouts from property funds valued at a combined GBP 2.1 billion ($4.1 billion), joining a number of other banks and fund firms in imposing withdrawal restrictions amid the U.K. property slump.
Scottish Widows, a unit of U.K. bank Lloyds TSB Group PLC, said investors in the Scottish Widows Pension Property Fund and the Scottish Widows Life Property Fund will have to wait 180 days to withdraw or switch their investments because cash levels had fallen to less than 2% of the funds' combined assets.
Scottish Equitable, the U.K. unit of Dutch insurer Aegon NV, late last week said investors wishing to cash in policies or transfer out of its $3.9 billion commercial-property fund fund will have to wait as long as a year. Typically the fund has allowed its 129,000 small investors to cash out whenever they wanted their money. Similar actions have been taken by Friends Provident PLC, a U.K. life- insurance and pension provider, and U.K. asset manager Morley Fund Management.
In addition, New Star Asset Management Group said Friday that it expects 2008 operating profit to drop significantly from 2007 as investors continue to pull assets. The fund, which has a large number of individual investors compared with many of its peers, is vulnerable to changes in market sentiment.
So far, rushes on redemptions are being felt primarily by funds in the U.K. Most funds there are set up as open-ended funds -- often targeting small investors and typically letting them redeem their shares at any time.
By contrast, no significant customer withdrawals have been reported in the U.S., partly because most are structured as limited partnerships for institutional investors. They are more restrictive about when investors can redeem their funds.
Commercial-property values are falling world-wide, largely because of the credit crunch. While most office buildings, shopping centers and other commercial property are still throwing off healthy cash flow, they are worth less to investors because financing costs have risen.
