Aegon Asset shuts £530m UK property funds

Aegon Asset Management said on Wednesday it has closed its UK Property Income and Property Income feeder funds after failing to raise sufficient cash to meet redemption requests, following a similar move last month by Aviva.

The Aegon Property Income fund had £380 million in assets under management and the feeder funds had £150 million, according to Morningstar.

Aegon said in a separate fact sheet it hoped to start distributing around 40% of the money locked up in the funds to investors in the third quarter, Reuters reported.

It would take between 12 and 24 months to complete the distribution, Aegon added.

“Following the onset of the Covid-19 pandemic in March 2020, the decision was taken to suspend the Aegon Property Income Fund and its Feeder Funds due to material uncertainty over valuations in the UK property market,” said Aegon Asset Management.

“Since then, the funds have remained suspended as we have worked to raise liquidity to meet anticipated investor redemption demands.

“It was initially hoped that the suspension would be lifted in Q2 2021, however, it has proved increasingly challenging to raise sufficient liquidity whilst also ensuring that continuing investors have a representative and well-balanced portfolio.

“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.

“Property investors, especially those invested in daily dealt funds, have faced an extended period of stress over recent years.

“Following the Brexit referendum, the Aegon Property Income Fund was one of the few authorised property funds to remain open.

“Latterly, the economic downturn and Government imposed lockdowns following the onset of the Covid-19 pandemic have further challenged the sector, as has uncertainty about the long-term future of daily dealt property funds.

“These factors have created exceptional conditions for commercial and investment property markets in the UK.

“Aegon AM will continue to raise liquidity and pursue the sale of all properties owned by the Aegon Property Income Fund.

“Property sales can take time and must be done in an orderly manner to ensure fair prices are achieved for all its investors.

“Aegon AM 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.”