Pension worry

Malthusian

kidmugsy wrote: »

(ii) Don't ever again be so rash again as to invest in an open-ended property fund.

It is not rash to invest in open-ended property funds. The main alternative is to invest in closed-ended property funds which can trade at discounts of 30% or more to net asset value at the kind of times when open-ended funds are gating withdrawals. And so in practice the option to sell during a panic is of little value, and the vast majority of closed-ended investors do the same as open-ended ones, hang on until normality is restored.

Closed-ended property funds are also commonly geared, which means that if they become unable to pay the interest on their debt the value can drop to zero with nil chance of recovery - that can't happen with open-ended funds.

The other alternative being not to invest in commercial property at all, which may significantly raise sector specific risk, especially when all other investment sectors look inflated.

Malthusian

AnotherJoe wrote: »

Its not worth £100k one day, £102K the next week, £95K the week after £90k the following week and £105k the week after.

It could be. But no house is ever going to change hands five times in four weeks, so you'll never find out.

AnotherJoe

Malthusian wrote: »

It could be. But no house is ever going to change hands five times in four weeks, so you'll never find out.

Lol :good point D

kidmugsy

Malthusian wrote: »

It is not rash to invest in open-ended property funds. The main alternative is to invest in closed-ended property funds which can trade at discounts of 30% or more to net asset value at the kind of times when open-ended funds are gating withdrawals..

Rubbish. There's all the difference in the world between being able to get your money out, even if the shares are below their most recent high, and being unable to get your money out at all.

sargan

dunstonh wrote: »

1 -

However, reading your post again, the term market value adjustment applies to with profits funds. However, you say its the UK Real Estate fund.

The letter states 'This relates to the Standard Life UK Real Estate Pension Fund' and goes on to say 'Standard Life has made what is called a 'market value adjustment (MVA) of 5% to the underlying commercial property holdings of its funds. The value of your fund has gone down as a result of the MVA'

This seems to be clearly stating the value of my fund has gone down.

dunstonh

Typical standard life using different terminology to everyone else

Malthusian

kidmugsy wrote: »

Rubbish. There's all the difference in the world between being able to get your money out, even if the shares are below their most recent high, and being unable to get your money out at all.

Money which you might need at short notice so urgently and so desperately you would consider taking a 30% hit to get your hands on it should not be invested in commercial property in the first place.

jamesd

While normal redemptions for the Standard Life UK Real Estate Fund (PAIF) are not permitted at present you would be allowed to sell at the retirement age specified in a pension plan that might be invested in it indirectly via the SL SLI UK Real Estate Pension Fund (2R), SL SLI UK Real Estate Life Fund (RY), SL SLI UK Real Estate Fund (N3). Those in income drawdown are also allowed to sell and death payments involving sales will also be made.

The value adjustment was reduced from 5% to 4% on 15 August. Their Life Property Fund, Pension Property Fund, Property Income Trust, Global Real Estate Fund and Global REIT Fund remain open.

jamesd

sargan wrote: »

This seems to be clearly stating the value of my fund has gone down.

It's saying that the estimated value of the properties and cash in the fund has decreased because the expected selling price of properties in the fund has decreased. So yes, their valuers have estimated that the investments held by the fund are now of lower value.

This doesn't matter greatly if you don't want to sell at the moment. Longer term we were coming off the peak of a high in commercial property values before Brexit happened and if normal cycles continue further reductions in the value of commercial property can be expected. That's part of why there was a switch from net increasing investments in UK commercial property in 2015 to a net outflow in 2016. Now isn't a great time to be making new investments in commercial property.

kidmugsy

Malthusian wrote: »

Money which you might need at short notice so urgently and so desperately you would consider taking a 30% hit to get your hands on it should not be invested in commercial property in the first place.

People are forever doing things that they shouldn't do in the first place.