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UK funds shore up defences

Moves in response to slowing property returns, rising redemption requests

(LONDON) Britain’s multi-billion- pound property fund industry shored up some of its defences and eyed contingency plans on Tuesday in the face of a weakening domestic market and growing demands from investors to withdraw funds.

Aviva-owned Morley Fund Management said institutional investors in its pooled pensions property fund could have to wait a year to withdraw cash, while UBS and Deutsche Bank’s RREEF invoked similar clauses on their main UK property funds, according to market sources.

The moves were in response to slowing property returns and rising redemption requests. Although precise data on a fund-by-fund basis is unavailable, the Association of Real Estate Funds (AREF) last month reported the first quarterly net outflow across its membership since early 2003 in the three months to end-September.

Britain’s once red-hot commercial property market has gone into reverse since the summer as fallout from the US subprime mortgage crisis has ratcheted up the pain of higher interest rates, just as the country’s housing market has soured after an extended boom.

According to benchmark data from Investment Property Databank (IPD), which collates information directly from real estate valuers, British commercial property in October posted its biggest monthly drop in average capital values since May 1990, during the country’s last full-blown property recession.

 

Source: Reuters (Business Times 6 Dec 07)

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