Q&A - Update on our property funds

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Market volatility in the wake of the UK’s decision to leave the European Union has resulted in both fair value price adjustments and the deferral of redemptions for a number of property funds offered by Aegon.

This has affected Aegon insured funds, and OEICs and unit trusts offered by fund managers on our Aegon Retirement Choices and Aegon One Retirement platforms.

Please read our Q&As and speak to a financial adviser if you’re at all unsure about what this means for your savings.

When funds directly invested in physical properties (bricks and mortar) experience a higher number of sellers than buyers they eventually reach the stage where they have to sell properties to raise cash to fulfil redemptions (payments out).

The affected funds are usually invested in commercial property, which can’t always be sold quickly. To manage the fund to the benefit of both long-term investors and those who want to exit, the fund needs to allow time to sell selected properties at a reasonable price. It wouldn’t benefit either group of investors if a fund sold properties too quickly at lower values than could be expected in ordinary market conditions.

In order to do this, funds need to suspend payments out of the fund to allow the manager time to raise cash levels by selling properties.

A number of property funds have recently announced the deferral of redemptions (payments out). This will result in investors being unable to pay into, or take money out of, the affected funds until such time as the underlying fund manager resumes trading in those funds.

Single payments or transfers in cannot be made whilst the fund is in deferment.

Regular payments into the fund will be applied as normal unless you tell us to re-direct them elsewhere. However, they will not be accessible until the fund manager resumes trading. This is not the case if you are invested in any of the affected property funds (see 'which funds are currently affected by deferments? for details) via Aegon Retirement Choices (ARC).

Any payments made into these funds by customers using ARC will be redirected to their individual cash account facility and not invested directly into the fund.

Investors on ARC can gain access to any payments redirected to their cash facility as a result of this deferment.

As at 27 July, the funds experiencing deferment of redemptions are:

Insured property funds offered by Aegon

  • Aegon Henderson UK Property (AOR)
  • Aegon Property Select Portfolio
  • Scottish Equitable M&G Property Portfolio
  • Scottish Equitable M&G Property Portfolio (ARC)
  • Scottish Equitable Threadneedle UK Property Trust
  • Scottish Equitable Threadneedle UK Property Trust (ARC)
  • Aegon international M&G Property Portfolio Series A – offshore investment
  • Aegon international M&G Property Portfolio Series B – offshore investment
  • Aegon international Property fund Series A – offshore investment
  • Aegon international Property fund Series B – offshore investment
  • Aegon international Property Select Portfolio Series A – offshore investment
  • Aegon international Property Select Portfolio Series B – offshore investment
  • Aegon international Select Distribution Series A - offshore investment
  • Aegon international Select Distribution Series B - offshore investment
  • Aegon international Select Reserve Series A - offshore investment
  • Aegon international Select Resesrve Series B - offshore investment
  • Aegon international Threadneedle UK Property Trust Series A – offshore investment
  • Aegon international Threadneedle UK Property Trust Series B– offshore investment

Unit Trusts and OEICs available via Aegon Retirement Choices

  • Aviva Investors Property Trust
  • Henderson UK Property
  • M&G Property Portfolio
  • Standard Life UK Real Estate
  • Threadneedle UK Property Trust

We can’t give any guarantees. The UK commercial property market remains volatile in the wake of the UK’s decision to leave the European Union. However, we are actively monitoring the situation in partnership with all of our property fund managers and any updates will be detailed in our news section(Opens new window).

For financial advisers and discretionary fund managers who use our model portfolio service only. 

Where an affected fund is used in a model portfolio the allocation to that fund will be removed and will become a non-realisable asset held outside of the model.

The asset allocation of the model portfolio will be updated, with the allocation to the affected property fund reassigned to cash. This means that investments into the fund can continue as normal, but the allocation that would have gone to property will be invested into cash, unless you update your model.

Where a model portfolio is rebalanced, that rebalance will apply to all investments in the wrapper, except the non-realisable property asset.

When the affected property fund resumes trading, the frozen assets remain outside the model, but can be accessed again and will be affected by any rebalancing activity. The reopened fund will also become available for you to add back into model portfolios if you wish. Rebalancing activity once the fund has reopened will result in affected property assets being sold to achieve the desired asset allocation, unless the fund is added back into the model. We won’t automatically add affected funds back in.

We recommend that advisers and discretionary fund managers review their model portfolios in the light of these changes.

Following the result of the EU referendum, uncertainty across the UK direct property market means accurate property valuations are difficult to determine. A fair value pricing adjustment means the fund will be priced in a way which ensures investors receive a price which is in line with what is expected to be realised from the sale of the properties.

These reductions could impact any fund that holds direct property investments and some funds may experience more than one fair value adjustment as markets stabilise.

The funds directly affected are:

Insured property funds offered by Aegon

  • Aegon Henderson UK Property (AOR)
  • Aegon Kames Property Income (AOR)
  • Aegon Property
  • Aegon Property (ARC)
  • Aegon Property Select Portfolio
  • Aegon Property Select Portfolio (ARC)
  • Scottish Equitable Henderson UK Property
  • Scottish Equitable L&G Property
  • Scottish Equitable L&G Property (ARC)

Unit Trusts and OEICs available via Aegon Retirement Choices

  • Henderson UK Property
  • L&G Property
  • Kames Property Income

On 28 June 2016, the fund implemented a fair value price reduction. This means that those invested in the Property fund will have seen a decrease in the value of their investment in addition to any gain/loss from normal daily price movements. The change for each fund as at 28 June is outlined below:

  • Property pension fund -3.1%
  • Property life fund -2.9%

We have asked our independent property valuers, Jones Lang LaSalle, to provide updated portfolio revaluations to us fortnightly rather than monthly until prices within the UK commercial property market show signs of stabilisation.

Aegon’s £700 million Property fund has not been suspended and currently has a healthy liquidity position of over 27% following prudent actions taken prior to the EU referendum.

Yes, further fair value price reductions could be made whether a fund is currently in deferment or not.

We are actively monitoring the situation in partnership with all of our property fund managers and any updates will be detailed in our news section(Opens new window).

We don’t give advance notice of any changes that could lead to some investors getting an unfair advantage over other investors by taking their savings out shortly before the fair value reduction was applied.

If you’re uncertain about how this affects your investments, please speak to your financial adviser in the first instance. If you don’t have a financial adviser you can find one in your area at unbiased(Opens new window).

You can also contact us, but please remember we won't be able to give you any financial advice.