Canada Life ends fair value adjustment on UK property funds

Added 30th September 2016

Canada Life has removed the fair value adjustment on property values in its commercial property funds imposed at the start of the month when it lifted a suspension of redemptions.

Canada Life ends fair value adjustment on UK property funds

The insurer said the move follows the latest review of portfolio property valuations and current market conditions and reflects its view that the property market’s behaviour is returning to a more stable pattern following the UK’s decision to leave the European Union.

“Consequently we believe an adjustment is no longer necessary to ensure fair treatment of investors considering investing in, or withdrawing from, the funds,” it said.  

Canada Life lifted the suspension of redemptions on the Canlife UK Property life and pension funds on 1 September 2016 after it had been originally imposed on 6 July following the market instability which resulted in the wake of the Brexit vote.

Market volatility eases

 “As transactional evidence of market values has emerged post the EU Referendum decision, valuers have removed their caveats on valuations. I am pleased that in light of this we are able to return to our normal pricing practices and therefore remove our fair value adjustments from all our funds,” said David Marchant, chief investment officer of Canada Life.

The suspensions of trading and value adjustments at most of the leading UK property funds imposed in early July after the EU referendum have now been largely lifted.

On 26 September Standard Life Investments announced it would reopen the suspended £2.6bn UK Real Estate Fund and associated feeder fund from 17 October. This followed a similar announcement several days earlier from Henderson Global Investors, which said it will re-open its UK Property PAIF and its feeder fund for trading on 14 October.

On the same day Columbia Threadneedle Investments said the trading suspension on the Threadneedle UK Property Authorised Investment Fund and its feeder fund was to be lifted from 26 September.

Of the major UK property fund providers only Aviva Investors and M&G Investments are yet to confirm date for the lifting of restrictions on their offerings. 

Format questioned

However, although the turmoil has been remarkably short lived, the experience has raised questions about the suitability of the open-ended structure for property funds. 

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Richard Hubbard

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Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.


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