The Aegon Property Income Fund is set to be permanently closed after the asset manager was unable to raise sufficient liquidity to meet redemption requests.
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The £381m fund was suspended in March, along with other major UK property funds, due to problems confirming the value of the underlying assets due to the pandemic.
Aegon said it was closing its real estate investment fund to “ensure all investors are treated fairly”.
Initially, asset managers expected to restart in the second quarter of 2021, but this did not materialize due to liquidity issues and other factors.
“Accordingly, to ensure that all investors are treated fairly, Aegon AM has decided to close the fund and take steps to return the proceeds to investors as soon as possible in a fair and orderly manner.” the company said in a statement.
Aegon Property Income Fund had accumulated a cash level of 31.6% at the beginning of June.
Oli Creasy, property research analyst at Quilter Cheviot, said Aegon’s decision to close its property fund was not surprising.
“This fund was considered to be at risk earlier this year, but that view strengthened following news in May that a similar Aviva fund was taking similar action.” he said.
“The fund has been struggling for some time and its returns for the year have been particularly disappointing, particularly given that a significant proportion of its assets have been held as cash throughout this period. Significant underperformance also likely contributed to this decision, as the average real estate fund returned -1.6%, compared to a return of around 6% over the period.
“While the fund is not overly exposed to retail and leisure, which are probably the biggest problem sectors in UK real estate at the moment, it is significantly underweight in high-quality industrial sectors and in rural areas (e.g. The fund has significant exposure to office real estate in London, which has also struggled during the pandemic, with high vacancy rates and the fund clearly feeling the full impact of the pandemic. I’m having a hard time turning it around. The vacancy rate has skyrocketed from just 1.2% two years ago to 23%.
