canada life property fund

P

pegasus36

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got a letter this week from the above stating that withdrawals from the fund have been deferred for 6 months and that a withdrawal at the end of that period will only pay out the value of the fund at the end of that period.

excuse my naivity but presume this is kosher? bloody annoying though that this can be done. something like this should be stated very explicitly at the outset.
 
Irish Life did this previously. It's quite a legitimate practice to protect the fund from excessive outflows.

If too many people want to leave the fund at the one time, the fund manager has two choices (a) start selling property to meet the demands for cash or (b) discourage investors from leaving. If s/he chooses (a), the fund becomes a forced seller of property into a weak market. Not desirable.

Have a look back through your Terms & Conditions and/or Policy Conditions - the fund manager's discretion to do this was probably in there.
 
It'll definitely be in there, nicely hidden deep down in the small print and written in (arguably?) vague terms such as "being a property fund, this fund may be more illiquid that equity based funds".

What won't be there I'd be almost prepared to bet, is a stark, clearly worded, obviously placed warning that with a property fund may decide to hold on to your money for as many months as it sees fit. I would guess if such a warning was there few would invest in property funds.
 
gradgrind said:
It'll definitely be in there, nicely hidden deep down in the small print and written in (arguably?) vague terms such as "being a property fund, this fund may be more illiquid that equity based funds".

What won't be there I'd be almost prepared to bet, is a stark, clearly worded, obviously placed warning that with a property fund may decide to hold on to your money for as many months as it sees fit. I would guess if such a warning was there few would invest in property funds.
Click to expand...

Can you back up this opinion with any evidence or is it just unsupported hearsay?
 
Well it's more "readsay" than hearsay.

The quote I gave above is as close as I can remember the one I saw in my pension companies description of their property fund. Someone picking a company pension fund is at the mercy of the documents provided to the company and then passed on to the employee, it might just be the glossy fund description of all available funds. No doubt there are detailed descriptions available but I'd guess many fund buyers don't see them. They should make it their business to dig out the info but it's the real world and most won't.

The lock in period is such a significant restriction I really think it should be made blatantly obvious to the buyer. There should be no excuse for not seeing it.

It'd be interesting to dig out old descriptions of funds since now most are in 6 month periods they've little choice but to be more open in their more recent descriptions.

This Permanent TSB info on the Irish Life property fund is fairly typical of the warnings I've seen.

[broken link removed]
"
Important notice

Investing in property is different from other types of investments such as investing in shares for example, it takes more time to sell property and the transaction costs are higher. The property market responds less quickly than stockmarkets and tends to be cyclical, in other words, it can rise and fall for long periods. Under certain market conditions it is possible that the high cost and time associated with buying or selling property may affect your investment in the following ways.
If we do delay, we will carry out your request using the value of units at the end of this period.
If a large number of investors cash in or switch investments from our property investments, we can reduce the value of units in the fund to protect the interests of all policyholders"
Click to expand...
 
This is a quote from the Canada Life Property Fund brochure, printed in the same size font as the positive stuff on precening pages: -


Investors should understand that due to the fact that
property assets are not as liquid as other asset types,
restrictions may be imposed from time to time on transfers​
out of the fund.
Click to expand...



I have to say that this quote, and the one from the Permanent TSB brochure above, are plan enough English for any prospective investor, in my opinion.
 
Well I did say originally it was "(arguably?) vague terms". But on this site alone a few people were surprised at the lock in. I doubt they can't read plain english.

Investors should understand that due to the fact that
property assets are not as liquid as other asset types,
restrictions may be imposed from time to time on transfers
out of the fund.
Click to expand...
To someone reading the above comment - how long can the restriction be - 6 days, 6 months, 6 years, as long as they like? Do they mean maybe you can't remove 100% of your fund value in one go? Someone could just think it might take a few days longer to exit than from the fund than from an equity fund.

Why not a large obvious warning saying "When property prices are going down, it's possible this fund will impose up to an X month delay on exiting"?
If the warning they give is perfectly adequate then a simpler warning should have no negative effect on the numbers signing up.
 
gradgrind said:
Well I did say originally it was "(arguably?) vague terms". But on this site alone a few people were surprised at the lock in. I doubt they can't read plain english.
Click to expand...
Judging by many of the posts here on AAM about such investments quite a few people don't bother reading the terms & conditions of such investment agreements at all before signing up!
 
Irish Life brochures have a crystal mark for plain english and also an honesty accreditation as well. Customers have to take some responsibility for reading the material!
 
I think it is fairly clear in most documentation that the company has the right to defer encashment. Maybe what's not made so clear is that this is a very real possibility. To many it must read like some technically remote possibility that has to be alluded to out of legal formality.

What definitely is not made clear is that the true "bid - offer" spread on these funds is way over 10% reflecting 9% stamp duty and also a large "natural" spread.

In many ways unitising property is something of an illusion, arguably property just ain't liquid enough to lend itself to unit linking.

At least this reality should be spelt out more clearly in brochures, and not merely by stating that they "reserve the right to defer encashments".
 
I have resurrected this thread fom 2008.

After a few years of negative growth, I see from Times today that this Canada Life fund has grown nearly 12% in 2012 year to date.

Anyone know why?
 
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