Gated Aegon property fund still struggling with liquidity

Gated Aegon property fund still struggling with liquidity

Aegon Asset Management’s property fund is still struggling to sell assets to re-open for withdrawals but has it hinted at a re-opening date.

Aegon said in a statement to investors this week (April 27) it would re-open the fund when it reaches satisfactory liquidity levels, to ensure it can match the level of redemptions requested by investors.

It is currently holding a cash position below its target liquidity level, as “property sales can take time and must be done in an orderly manner to ensure we achieve a reasonable price for our investors and do not compromise the portfolio’s characteristics and future performance prospects”.

The firm added it is expecting to be able to re-open the fund by June, and in the meantime it has implemented a 0.15 per cent temporary discount to the annual management charge.

This has resulted in an annual management charge of 0.6 per cent as of November 1, 2020, until the end of the suspension period.

The fund, along with many others, gated in March last year following ‘material uncertainty’ clauses introduced by independent valuers who said they were unable to correctly value the fund’s properties amid the pandemic.

Aegon’s property valuer, CBRE, lifted the material uncertainty clause at the end of September, however the fund has remained gated due to a fundamental mis-match between the daily trading available to investors and the illiquid nature of holding property.

Last year the Financial Conduct Authority proposed a 180-day notice period for open-ended property funds to fix the liquidity mis-match that has plagued these vehicles for years.

But property fund managers raised concerns over the regulator’s proposal, claiming this could reduce consumer choice and create problems for other parts of the market.

Investment analysts have commented that longer notice periods would cause investors to pivot to real estate investment trusts which are seen as more aligned with the illiquid nature of property.

The results of the FCA consultation are expected this year.