Canada Life lifts fund redemption suspension

The real estate investment management arm of insurer Canada Life is the first firm to life the trading suspension on its UK retail fund following the Brexit fallout. Three of the seven affected firms have yet to disclose their intension regarding their suspended funds.

Canada Life has lifted the suspension of redemptions on its £500 million ($662 million; €594 million) Canlife UK Property fund, a measure it implemented just under three months ago following a run of withdrawals from nervous investors in the wake of the UK’s decision to leave the European Union.

However, due to continuing uncertainty regarding the UK property market following Brexit, the insurance giant has imposed a 7 percent charge on investors who do withdraw cash. Canada Life said it was applying this charge in order to “balance the interests of policyholders who may leave the fund with the interests of those who remain.” The firm added that it would review the situation on a weekly basis and make further value adjustments where necessary.

In early July, Canada Life became the fifth firm to suspend trading on its open-ended UK retail fund, following Aviva Investors, M&G, Henderson Global and Standard Life. It was quickly followed by Aberdeen Asset Management and Columbia Threadneedle, which also suspended their UK retail funds. The moves meant around 60 percent of the UK commercial property market held in such vehicles was under lock and key.

At the time, Canada Life said it took the decision to gate the fund due to the “ongoing uncertainty around the pricing of commercial property assets following the vote to leave the European Union, and the recent rise in requests to withdraw (or switch) from the property funds.”

“We have had two month end pricing valuations since the United Kingdom’s vote to leave the European Union and our decision to defer requests to withdraw investment in the property funds,” David Marchant, chief investment officer of Canada Life. “Real estate investment and occupational transaction activity has been subdued in that time, and the market outlook remains unclear.

“Our external valuers continue to impose a caution to the accuracy of values in the lack of market transparency,” Marchant added. “However, we have been closely monitoring cash flows within the fund and, following the successful completion of two real estate sales during August, liquidity has been improved to a level which we expect can meet redemption requests and ongoing liquidity requirements.”

In August, Aviva Investors told investors they were likely to be locked into the firm’s £1.6 billion open-ended retail fund for between six months and eight months. In doing so they became the first of the affected firms to confirm that the fund suspension was not a short-term reactionary measure.

During the same month, Henderson announced its fund suspension would remain in place and would be reviewed every 28 days. In the immediate aftermath of the referendum, Aberdeen announced a 7 percent value adjustment on investors’ withdrawals, but it has since reduced this to 5 percent. Columbia Threadneedle, M&G and Standard life have yet to announce their intensions regarding their suspended funds.