Money News
Recent turmoil in the mortgage market is hitting the largest property funds, forcing them to cut as much as 8% off the value of their underlying properties last month.
Fund groups have received their latest property valuations for November which show that the independent valuers have made significant adjustments to their valuations of the commercial property itself.
The £3.6 billion Norwich Property Trust has cut the valuation of its underlying properties by 7.02% while Norwich Union's life property fund had seen 4.16% wiped off its value and the pension property fund has seen 4.59% taken off.
M&G has followed its move last week to impose a 90-day notice period on institutional investors in its offshore M&G Property Fund by marking down the value by 7.2%; the value of the onshore £1.2 billion M&G Property Portfolio fund has fallen by 3.9%.
The managing director of UK sales, Jonathan Willcocks said: "The onshore fund has a higher degree of cash and the offshore fund has some collectives which have been marked down too.
"We think that the fundamental property is still sound and the properties have not changed but clearly there is some negative sentiment and it is right that is reflected in the price."
Resolution Asset Management has seen a decrease in the value of its £719 million Resolution Asset UK Property fund of 7.7%.
New Star UK Property Trust has seen the value of the direct properties held in its portfolio fall by 4.08%.
Scottish Widows Investment Partnership values its properties to the middle of the month. Over the month to 15 November prices fell by 2 -2.5%.
The commercial property market as a whole has been hit heavily over the past two months with most leading fund houses conceding that a short to medium-term correction is under way.
Philip Nell, the manager of Norwich Property Trust told his investors: "Rising interest rates and the impact of the US sub-prime credit crisis have led to a weakening of investor demand for UK commercial property resulting in negative returns across the broad market."
"In the short-term returns are likely to weaken further and we expect property valuations to correct through the remainder of this year and into early 2008."
These changes to property funds are due to the underlying assets being revalued and companies altering their fund prices accordingly. This is similar to what we saw in the summer of this year.
Guidance will be coming out to you shortly, focusing specifically on property and asset allocation.
04 December 2007 © Moneyextra.com
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