Property funds repricing following EU ‘leave’ vote

Fund update

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Market volatility in the wake of the UK’s decision to leave the European Union has resulted in fair value price reductions for a number of UK property funds – including the Property fund and the Property Select Portfolio.

Accurate property valuations are difficult to ascertain so soon after last week’s referendum but some downward price pressure is likely. A fair value price reduction aims to make sure the portfolio is valued at a level consistent with prices that could be achieved in selling property holdings to fund any withdrawal. Ensuring savers who withdraw money do so on a portfolio that is not valued too highly protects remaining investors from incurring losses from a property sale. 

This sort of price reduction could impact any funds holding direct property investments and some funds may experience more than one fair value reduction as markets stabilise.

Investment Director, Nick Dixon, said: “Like other property fund providers, we have taken the decision to make a fair price reduction on our property funds following last week’s vote. This is designed to make sure all investors receive a fair price, and we will monitor the price of insured Aegon property funds in the coming weeks.”

There was a fair value price reduction to the Property fund on 28 June, which resulted in a 3.1% fall in the unit price of the pension version, and a 2.9% fall in the life version of the fund. This decrease was in addition to any gain or loss from normal price movements.

Looking forward, the fund’s properties will now be valued fortnightly instead of monthly until markets stabilise, so its managers can more accurately monitor price fluctuations. In addition, the wider market will be monitored on a daily basis and further adjustments could be made as a result. 

The Property Select Portfolio is made up of five separate property funds, three of which have made fair value price adjustments in the wake of the referendum. This resulted in a 2.1% fall in the price of the portfolio between 24 and 28 June 2016, in addition to any gains or losses from normal price movements. 

Further adjustments could be made to the funds within the portfolio, which could impact the unit price of the Property Select Portfolio.

If you want to know more, please read our Q&A. Please speak to a financial adviser if you’re at all unsure about what this means for your savings.