Irish Life blocks withdrawals from €500m property fund as investors rush to exit
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Steven Barrett
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It's a regular enough occurrence. Property funds are actual buildings. While they hold a fair amount of cash, if there are a lot of withdrawals, they put a block or a 6 or 12 month moratorium on withdrawals. Otherwise they will be forced to sell buildings to satisfy redemptions. Ireland is a small country and all the big players know who owns what, so they will know if there's a forced sale which will drive the price down.
Allpartied
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Its not that regular. It usually only occurs when property prices are collapsing. If prices were robust and sure to rise, the funds would be falling over themselves to refund savers, because there would be a massive queue of people waiting to buy them, at even higher prices.
Its a red flag, a big one.
Blackrock1
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it's more like 2020 but thats not as sensationalist.
Brendan Burgess
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Allpartied
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2020, when we had a massive worldwide virus,which shut down the entire economy?
If its an economic repeat of that, without the virus bit, it will be pretty sensational.
Blackrock1
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i think the economy fared pretty well all things considered.
Yep, the smart money is looking to invest at 1-2 % while inflation is running at 7-8%
Steven Barrett
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Financial crises of '08, Brexit, Covid, now. That's regular enough in the context of investment funds.
As far as I can remember it wasn't locked for Brexit ?
My personal view is a fund which will occasionally/regularly lock in investors for several months isn't a fund I'll invest in. There's plenty of higher returning and vastly more diversified funds that will never do this.
If I was in the pension version of this - despite being told by not to panic I'd have already asked to swap my money to another fund .
www.independent.ie
You're effectively been told the unit price of the fund is going down - in that case - you always sell.
In 2008 they also tried to keep the pension version open but had no choice but to also lock them in after a week or two. They want to keep the pension version open because if those people do nothing then every month the fund gets extra contributions - which reduces the immediate pressure to sell properties.
My personal view is a fund which will occasionally/regularly lock in investors for several months isn't a fund I'll invest in. There's plenty of higher returning and vastly more diversified funds that will never do this.
If I was in the pension version of this - despite being told by not to panic I'd have already asked to swap my money to another fund .
Pension savers told not to panic about Irish Life property fund move
THE move by Irish Life to restrict withdrawals from a major property fund it runs should not be a cause for alarm for pension savers, a leading financial adviser said.
www.independent.ie
You're effectively been told the unit price of the fund is going down - in that case - you always sell.
In 2008 they also tried to keep the pension version open but had no choice but to also lock them in after a week or two. They want to keep the pension version open because if those people do nothing then every month the fund gets extra contributions - which reduces the immediate pressure to sell properties.
Blackrock1
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As far as I can remember it wasn't locked for Brexit ?
My personal view is a fund which will occasionally/regularly lock in investors for several months isn't a fund I'll invest in. There's plenty of higher returning and vastly more diversified funds that will never do this.
If I was in the pension version of this - despite being told by not to panic I'd have already asked to swap my money to another fund .
Pension savers told not to panic about Irish Life property fund move
THE move by Irish Life to restrict withdrawals from a major property fund it runs should not be a cause for alarm for pension savers, a leading financial adviser said.
You're effectively been told the unit price of the fund is going down - in that case - you always sell.
In 2008 they also tried to keep the pension version open but had no choice but to also lock them in after a week or two. They want to keep the pension version open because if those people do nothing then every month the fund gets extra contributions - which reduces the immediate pressure to sell properties.
everyone investing in a fund will be aware of what can and cannot be done and make their investment decision on that basis.
That would be nice, it's simply not the case particularly in pension schemes where people signing up often just check what everyone else is doing and select the same set of funds. They don't care that much when it's a new pension because they're not investing a lump sum - it's money from future earnings.
In 2008 the IL property pension fund was only 2 years old (from what I can see on line).
I knew multiple people invested in that fund - at the time no one involved had experience in how that fund would be locked in a downturn - including the people managing and selling the fund. BTW the typical response of people trapped in the fund was when it was eventually unlocked was to give up and sell at the bottom - the despair phase of investing.
There was a warning in the small print that at times there could be delays in liquidating your investment. Very few people interpreted that warning as meaning the pension company could lock the investment for months or indeed years if they need to.
T McGibney
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Don't savvy investors either educate themselves on basic issues like the obvious relative illiquidity of property and property-based investments, or hire investment advisors to do so?
Blackrock1
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People trying to actively manage their pension investments like that (like selling out of equities in a dip) is madness.
Nope, not in company pension schemes. There a pension scheme is offered - it'll usually have some 5-10% company contrib. which means everyone signs, if you're imagining for most people there's a lot of thought put into fund choice or deep reading of the factsheets, or advisors hired to help - then I'm sorry to disappoint you. They're not "savvy" investors - for new employees this might well be there first and only investment.
T McGibney
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Isn't that what I said?
True - but that wasn't what I meant. I'm talking only about this undiversified and illiquid fund at that instant in time.
In 2008 it became plain to everyone that Irish property was collapsing, it could easily be seen in visible prices on residential and commercial property.
However Irish Life were only make gentle downward revisions in their property fund - it was out of step with the market reality - they for several months were using pre-crash values when people were exiting the property fund. Once they had the fund locked then they gradually wrote down the fund - by 30-40%.
Here was a fund that clearly had to lose value - if you know a fund with a degree of certainty is going to lose value and you can get out - then the madness is staying in it. That fund incidentally is still down about 25% on 2008 values and indeed has never reached those levels since.
BTW I'm not saying the current situation is anything like 2008.
Dave Vanian
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