Skip to comments.Axa bars withdrawals from property fund
Posted on 02/03/2008 8:55:16 PM PST by DeaconBenjamin
· Insurer blocks exit for 100,000 investors
· Crisis has seen some funds lose 50% of value
The insurance group Axa shut the door to withdrawals from its £2.1bn property funds yesterday, the latest victim of the slump in commercial property.
Axa said more than 100,000 small investors in the fund would not be able to access their money for up to six months, although regular income already being paid, retirements and death claims will not be affected.
It joins Friends Provident, Scottish Equitable and Scottish Widows in halting withdrawals from once high-flying funds, which many savers have seen as a safe haven for their pensions. About £8bn of small investors' cash is now locked into crisis-ridden property funds, which are suffering from plummeting returns. Typically, property funds have fallen in value by about 20% but in some instances the drop has been closer to 50%.
Panic selling by small investors has forced insurers to shut the funds as they have run out of cash reserves. In Axa's case, its cash "buffer" in the property funds had fallen to about 5%, prompting yesterday's decision to halt withdrawals.
Commercial property values, especially for City of London offices, have dived amid fears of a recession brought on by the global credit crunch. In late December, another insurer, Friends Provident, barred access to its £1.2bn property fund, followed by Scottish Equitable and Scottish Widows this year.
Ian Colquhoun, managing director of Axa's investment office, said: "The commercial property slowdown has resulted in a fall in the liquidity of property funds across the marketplace.
(Excerpt) Read more at guardian.co.uk ...
Safe haven or source of a high rate of return? Didja ever wonder why they call it a risk premium?
This is a sign of serious problems. The first cloud on the horizon was about 2 years ago, when a lot of high-value investors cashed out of these property funds - obviously, they saw what was on the way.
Not only that , an orchestrated need by the big banks to stiff the small investor with the losses.....government sponsored too.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.