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Aegon property funds set to close

Emma Lunn
Written By:
Emma Lunn

Aegon Asset Management plans to close the Aegon Property Income and Property Income Feeder funds permanently.

The funds have been suspended for 13 months due to uncertainty over valuations in the UK property market.

Aegon AM initially hoped that the suspension would be lifted in Q2 2021, but it has now decided to take steps to close the funds and return the proceeds to investors as quickly as possible.

Aegon AM said the economic downturn and government imposed lockdowns “had created exceptional conditions for commercial and investment property markets in the UK”.

The asset manager intends to make a series of payments throughout the closure period as sales are completed. Once the funds have closed, investors will be advised when these distributions will commence.

Ryan Hughes, head of active portfolios at AJ Bell, said: “Hot on the heels of Aviva closing their property fund, we have now Aegon announcing the same. Given the fund size had fallen to under £400m and would be expected to fall further upon any reopening, it was likely that the fund wouldn’t be viable in the long run and therefore it looks as if Aegon have made the sensible decision to wind up the fund. As ever, in this situation, it’s vital that Aegon communicate quickly and clearly with investors so they understand how the process is happening and most importantly, how long it’s likely to take.

“The challenge Aegon now has, like Aviva, is that the market knows they are a forced seller and this may make it difficult to sell down the underlying properties at the right price. As we have seen with the Woodford fund closure, getting the balance right between time and price is extremely difficult and sensitive and therefore the clear communication of this is key.”

Darius McDermott, managing director of Chelsea Financial Services, said: “This is now the second commercial property fund which has announced plans to close. The majority of the challenges facing this part of the market have come on the back of the turbulent conditions created by Covid last year.

“Clearly it is taking time for these vehicles to raise liquidity amid so much uncertainty, and while the FCA review is still ongoing, the fact a couple of funds are now closing their doors is creating major questions over the long-term viability of open-ended commercial property funds.”