Following the EU referendum, equity markets immediately suffered a dramatic fall. The markets have subsequently returned to near pre-referendum levels. However, commercial property is an area which has suffered, leading to a number of property funds suspending trading.

Property funds suspension

What's happened?

What's happened?

Commercial property funds have seen an increase in investment money being withdrawn over recent months, both in the build up to and following the result of the EU Referendum, due to uncertainty for the UK commercial real estate market.

This has led to a number of property funds; including the Henderson UK Property PAIF Feeder and M&G Feeder of Property Portfolio, suspending trading. This means they have stopped accepting further investment into and withdrawals out of the funds for the time being.

As a portfolio customer with of Nationwide, you could have up to 10% of your portfolio invested in these funds.

Property funds v equities

Property funds v equities

Whilst property funds are generally less risky than equities, they can go through periods of time when funds are less accessible.

Unlike equities – where you are basically investing in shares of that company – commercial property funds typically invest in buildings, warehouses or shopping centres and like house purchases, can take a significant length of time to be bought and sold.

Why suspend trading?

Why suspend trading?

  • The suspension allows for an orderly sale of some properties and helps to ensure the fund manager can maintain a mix of quality property and tenants while cash liquidity is raised before the re-opening of trading in the funds again.
  • Continued increased withdrawals could lead to fund managers having to sell properties held within the fund at potentially lower than market value prices. This is due to the demand to raise levels of cash within the fund so quickly.
  • Fund Managers suspend trading in commercial property funds to try and achieve the best deal for investors.

The suspensions will be reviewed on a regular basis and lifted when it is deemed prudent to do so.

What does this mean for my investments?

Deals placed after 12pm on the 4th July 2016, for the M&G Feeder of Property Portfolio and after 12pm on the 5th July 2016, for the Henderson UK Property PAIF Feeder will not be accepted. This applies to new investment money and withdrawals. This also applies to any fund switches in and out of these funds.

Both funds will continue to be actively managed by the respective fund managers who will also continue to report on any investment activity as normal.

Depending on your levels of trading online through your Investment Portfolio Service or your Personal Finance Portal (for ongoing service customers), and your attitude to risk, your money held within a property fund should represent only a small proportion of your overall investment portfolio, which could also include; government bonds (GILTS), corporate bonds and equities.

Your funds continue to be invested and securely held for your benefit. Like any investments, the value can go down as well as up and you may not get back the money originally invested.

You may have altered, or created a new portfolio during the period the funds were suspended. Please see our FAQs below for guidance in this situation.

Next steps

Your investment portfolio should be considered as a medium to long term holding. If you don’t currently need to access your portfolio, then there is no action required. If you do need to access funds, consider contacting your Financial Planning Manager to make sure all your options are considered.

If you hold these funds, or are in the process of a transaction which involves them, Legal and General will contact you regarding this as soon as possible. Legal and General will also notify you when the fund suspensions are lifted.

FAQs

Continued increased withdrawals could lead to fund managers having to sell properties held within the fund at potentially lower than market value prices. This is due to the demand to raise levels of cash within the fund so quickly.

The temporary suspension of dealing allows the fund managers to take time to sell properties, in a controlled manner, at more competitive prices.

Yes, the fund managers will continue to actively manage the funds and will continue to report on any investment activity as normal.

Both funds use independent valuers to value their property assets. Since the suspensions were implemented, the funds' independent valuers have moved from valuing these assets on a monthly basis to a weekly basis.

You can either log into your Investment Portfolio Service, or your Personal Finance Portal (for Ongoing Service customers), or check our fund table.

There is no maximum time limit on how long the funds can be suspended. Both fund groups are not able to say how long they expect their respective suspensions to last. They are monitoring the situation very closely and this is formally reviewed every 28 days (from the date of suspension).

Your funds continue to be invested and securely held for your benefit. Like any investments, the value can go down as well as up and you may not get back the money originally invested.

The suspensions have been implemented in order to ensure the fund managers can conduct property transactions in such a way that allows them to get the best possible deal for existing customers.

Legal and General will be unable to sell units from the above property funds, therefore they will process the part of the transaction which involves funds which are not suspended, and the property monies will be retained.

If you request a withdrawal consisting entirely from funds which are not suspended then this will go through as normal.

If you request a withdrawal using a proportional spread from your portfolio Legal and General will be unable to sell units from the above property funds, therefore they will process the instruction spreading the withdrawal amount between your non suspended funds, and the amount invested in property will remain. This will alter your percentage proportion of funds held within property compared to your whole portfolio, so please be mindful of this.

If you have initiated a transaction which involves the above funds, and L&G cannot process the transaction, they will contact you and inform you of your options.

If your ISA is from previous years' contributions i.e. you haven’t put any money in to it this year, then any money that is not invested in a suspended property fund can be moved in the normal way. Your current provider will simply retain the money in the property fund as a Stocks & Shares ISA until the suspension lifts. The current provider should explain your options for the remaining money but will aim to complete your request to move it as soon as they can.

For any ISA contributions in the current year, the whole Stocks & Shares ISA has to be moved together, so as the property part cannot be moved at present the whole of this year's contributions will need to stay where they are until the suspension lifts.

You can still withdraw monies from funds which don't involve property, but please be aware that a standard withdrawal/redemption from an ISA will lose its ISA status unless transferred to another ISA product. Please see the above FAQs on full and partial withdrawals.

Any regular premiums/payments which don’t involve the above funds will be processed as normal. Legal and General will contact you if any payments which would ordinarily be routed to the above funds are blocked or delayed.

Legal and General will be writing to all customers affected, including those who have initiated transactions recently, or simply hold the funds explaining the current situation and what to do.

If you have any specific questions around your investments that haven’t been answered within these pages, please contact your Financial Planning Manager, or call us on 0800 030 4078 Monday to Friday, 9am to 5pm.

This is not intended to promote or provide a recommendation in relation to our investment service. Any comments made are intended to provide general information only. If you would like any further information, please contact your Financial Planning Manager.

The value of your investment can go down as well as up so you may get back less than you originally invested.

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