Aegon closes property funds on liquidity issues

The Aegon Property Income Fund will close will close permanently as the asset management company has not been able to raise sufficient liquidity to meet redemption requests.

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The £381m fund was suspended in March, along with other major UK property funds, as the pandemic brought about issues in ascertaining the value of underlying holdings.

Aegon said that it is closing its property investment funds to “ensure all investors are treated fairly”.

Initially, the asset manager was hopeful of reopening in Q2 of 2021, however liquidity issues and other factors meant that this didn’t happen.

“Accordingly, in order to ensure all investors are treated fairly, Aegon AM has decided to take steps to close the funds and return the proceeds to investors as quickly as possible, in a fair and orderly manner,” the company said in a statement.

The Aegon Property Income fund had amassed a cash level of 31.6% earlier in June.

Oli Creasey, property research analyst at Quilter Cheviot said the decision by Aegon to close its property fund did not come as a surprise.

“The fund was considered to be at risk earlier this year, a view that hardened following the news in May that a similar fund at Aviva was taking this same course of action,” said Creasey.

“The fund has been struggling for some time with one year returns particularly disappointing, especially when considering that a considerable percentage of assets were held as cash throughout this period. The broader UK property market returned c.6% over the same period, while the average property fund returned -1.6%, so significant underperformance will also have contributed to this decision.”

“The fund is not overly exposed to retail or leisure – arguably the biggest problem sectors in UK property at present – however, it is heavily underweight the high-flying industrial sector, and has significant exposure to regional (ex. London) office property, which has also struggled during the pandemic. With a high vacancy rate, the fund has clearly felt the full effects of the pandemic and have struggled to turn this around. Its vacancy rate has rocketed to 23% despite being at just 1.2% two years ago.”

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