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property funds playing dirty games

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mroller
mroller Posts: 397 Forumite
Part of the Furniture 100 Posts Combo Breaker
in Savings & investments
I have read this aticle below in the FT today, it's so unfair, how comes they are allowed to do this?

http://www.ft.com/cms/s/8cf36d50-2f19-11dc-b9b7-0000779fd2ac.html

I checked my account with HL this morning and saw the dip, initially I thought it was a mistake, and then I read the article and knew what happened.

basically, the have shaved 6% off the value of the fund :mad:
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Comments

  • jem16
    jem16 Posts: 19,587 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Can't access the link.
  • mroller
    mroller Posts: 397 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    jem16 wrote: »
    Can't access the link.

    you are probably using Firefox, try refreshing few times you might get the whole article.

    Otherwire use IE. you will get a snapshot.
  • jem16
    jem16 Posts: 19,587 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Nope using IE but it takes me to a page where it wants me to login.
  • dunstonh
    dunstonh Posts: 119,646 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    They are allowed to do it and it is common sense at this time.

    However, it should be noted that the ones which are mostly affected are the funds which have unit trust versions and not so much life or pension only. One of the causes of this has been singificantly higher than normal movement of funds between platforms. This affects the unit trust funds (and the life/pension funds that reinvest into the unit trust) heavily.

    I was speaking with a fund manager earlier in the week about their life fund and they have no intention of dropping the unit price as they never raised their valuations as much in the first place and havent been suffering outflows. Their fund wasnt available in unit trust form so havent suffered.

    Its been on the cards for the last 3 years and its only put us back 6-8 months. Rental yields will be more appealing now.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    The problem with this is that most investors won't have been told that accounting arrangements can be changed willy nilly with a significant and unexpected effect on the value of the fund, even though there has been no actual change to the value of the assets it holds.

    Most investors will have been aware that property fund managers can impose a ban on withdrawals for up to 6 months if there is a run on the fund, so as to prevent the need for a fire sale of properties.But this sudden change to the pricing, while allowed for in the fine print of the T&Cs, has not previously been advertised or explained by advisors.

    To investors it looks like an exit penalty of the MVA variety.It's no wonder people are not happy.
    Trying to keep it simple...;)
  • dunstonh
    dunstonh Posts: 119,646 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    It's no wonder people are not happy.

    Perhaps they should research what they invest into more carefully?
    has not previously been advertised or explained by advisors.

    Really? Find me a suitability letter or key features document that doesnt say "the value of your investments can go down as well as up".

    I would also say that most of the regular posters here dont use advisers. So, how you going to blame us for them? I am sure you will find a way.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • mroller
    mroller Posts: 397 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    dunstonh wrote: »

    Really? Find me a suitability letter or key features document that doesnt say "the value of your investments can go down as well as up".

    I have to disagree with you here.
    Investments can go up or down indeed and commercial property has gone down by 20% since January. No one complained about this (we were warned anyway). But here, what they did is discouting the value of the units by a further 6% relative to the NAV.

    I am not sure that this is fair to their customers as FSA rules stipulate. (btw,I amnot really bothered, I sold most of my commercial prop months ago, kept a very small stake in this fund).
  • cheerfulcat
    cheerfulcat Posts: 3,402 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    dunstonh wrote: »
    Really? Find me a suitability letter or key features document that doesnt say "the value of your investments can go down as well as up".

    But where does it explain that a fund manager can move to the bid price if too many people are pulling their money out of the fund?
    I am not sure that this is fair to their customers as FSA rules stipulate.


    mroller, the price drop technically only affects those who wish to sell their units, which is perfectly fair, if you think about it; there are expenses involved in selling the underlying investments ( particularly high in the case of property ) - surely it would not be fair for the remaining unit holders to have to pay those expenses?

    I do think, though, that this is a risk which should be brought to the prospective investor's attention. Worth bearing in mind, too, the fact that this pricing mechanism applies to all unit trusts, not just the property funds.
  • moneyandmountains
    moneyandmountains Posts: 231 Forumite
    mroller wrote: »
    basically, the have shaved 6% off the value of the fund :mad:

    Does anyone know when the annoncement actually was for Norwich Property. I notice how the change in pricing conveniently appeared in Citywire on the evening of the 10th. However, this affected trades placed that day.

    When you have a trade / settlement period, I had thought it was the price on the trade day that applied.

    I think it is one thing to change the pricing when it is announced out of trading hours, it is entirely different to change the price and then announce it.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    http://www.ft.com/cms/s/98c0d672-3130-11dc-891f-0000779fd2ac.html


    More in today's FT.
    Trying to keep it simple...;)
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