Scottish Widows halts property fund transfers

Scottish Widows yesterday became the latest fund manager to close the door on withdrawals from its commercial property funds, as growing numbers of nervous investors continued to shift their money out of the sector.

The life assurer, which is owned by Lloyds TSB, introduced a six-month delay period on transfers out of all of its life and pension commercial property funds, following in the footsteps of Aegon and Friends Provident, which have both taken similar steps over the past few weeks. Aegon has prevented investors in some of its funds from making withdrawals for a whole year.

Like its rival insurers, however, Scottish Widows stressed that investors cashing in their pensions due to death, or reaching retirement age, would not be affected by the measures.

The insurer blamed a sharp slowdown in the commercial property sector for its decision to impose a delay, claiming it was a necessary step to ensure the fund was "fair to all policyholders".

"Following several years of attractive returns, the commercial property market has seen a slowdown," the group said in an announcement. "This has led to some investors taking the profits they have made from commercial property over recent years, lowering the short-term liquidity levels of many property funds in the market. This includes the Scottish Widows Life and the Scottish Widows Pension Property Funds, from which we have recently seen high levels of switches into our other funds. As a result, the Property Funds need to sell more of their property investments than normal.

"The delay means that we can implement an orderly programme of sales over a longer period, with the aim of providing liquidity within a reasonable period for those who want to leave the funds."

In spite of the need for emergency provisions for its funds, Scottish Widows said it continued to believe in the benefits of investing in commercial property, claiming it expected long-term returns would continue to come in between those of bonds and equities.

So far, no retail property funds have closed their doors to withdrawals.