A rush to withdraw money from its commercial property funds has forced Scottish Equitable to introduce delays of up to 12 months for its customers. It affects investors in the Scottish Equitable Property fund, Select Reserve fund and Select Distribution fund. Aegon UK, which runs the fund, blames the rush to the exits on concerns about the US sub-prime mortgage collapse, recession worries and interest rates.
Friends Provident took the same action with its property fund last month.
Regular income payments, retirements and death claims will not be affected.
As real estate can take months to sell, property funds keep a proportion of their assets in cash to pay any investors who want to leave. But if unexpectedly large numbers of investors want to withdraw their money the fund can be forced into selling property cheaply because they need a quick sale.
“The level of withdrawals from our property funds has reached the stage where we now have to sell properties to raise cash to meet the requests for payments out,” the company confirmed.
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This is getting quite a bit of coverage now even though Scottish Equitable is not the first (or last) company to make such an announcement. This has featured in each news bulletin on Radio 4’s Today programme this morning and is now on Money Marketing too.
Scottish Equitable has launched a bit of a defensive campaign today in attempt to combat the ‘bad news’ on the media. We receievd an email from our account manager explaining the decision which all makes sense even if it is not welcome. A good summary of the company’s defence can be found at ifaonline.
Scottish Widows has now imposed a 180 day moratorium. Details can be found here.