Scottish Widows has become the latest investment company to suspend withdrawals on one of its commercial property funds, affecting 35,000 policyholders.
Investors in the company’s Life Property Fund were this week told they have to wait for 180 days before being able to take their money out.
Scottish Widows has been forced to impose the notice period in order to give itself time to sell some of the commercial property in its portfolio to meet rising requests for redemptions from investors.
The notice period will not apply on death, on critical illness claims or when the policy matures. It also does not affect investors who are making existing regular withdrawals.
It follows a near-identical move in January last year, when Scottish Widows imposed a 180-day notice period on both its life and pension property funds. This time, however, investors in the separate Pension Property Fund are not affected – though a spokeswoman said the fund will be kept under review.
Scottish Widows lifted the notice period on both funds in August 2008. A spokeswoman said it was difficult to tell how long the current suspension would last, but warned that conditions were arguably worse this year than last.
It has become increasingly difficult to sell commercial property due to the drying up of credit, which means that would-be buyers cannot secure the necessary funding. This puts investment companies such as Scottish Widows in a difficult position, as they cannot sell the properties in their portfolio quickly enough to meet investor demand for ready cash.
The move by Scottish Widows follows similar steps this year by other fund managers. Standard Life and Norwich Union last month both announced that investors in their life and pensions property funds would face a six-month notice period on withdrawals.
The reintroduction of notice periods on property funds follows a poor year of performance for commercial property. Last year pooled property funds returned nearly a third less than the previous year, according to figures from IPD, the property data provider.
