Failing Property Funds

Property funds have been one of the most popular - and one of the most disastrous-investments of the last few years with billions of pounds pouring into them on the back of powerful advertising.

Year on year returns for some of the biggest players have been appalling, warns ratings analyst Moneyspider.com. Investors in some of the most high profile funds have seen the value of their investments plummet over the past 12 months as the sector continues to spiral downwards

DESPITE some commentators forecasting an upturn in the sector's fortunes, two of the biggest funds - Norwich Union Property and Scottish Widows SWIP Property - have left their investors badly out of pocket over the past 12 months to the end of May, says online investment funds analyst Moneyspider.com.

NU's hugely popular Property Fund, with £2.5bn under management has plummeted by 22.8 per cent. A £5,000 investment in the fund would today be worth just £3,858.

Source: Moneyspider.com/Financial Express 02.06.2008

It is a similarly grim picture for the large Scottish Widows property fund, now down 17.6 per cent on this time last year, leaving investors with £4,116 out of £5k invested a year ago; as the table shows, all the most popular funds carry the lowest Moneyspider.com E rating.

"The sector remains in terrible shape," said Moneyspider.com's Tony Ahearne. "But the problem is that the fund managers have made it so hard for investors to get their money out by imposing such huge financial penalties for withdrawals."

"Losing a fifth of your investment is very bad news and all the more galling given the number of bank deposit accounts now paying 7 per cent."

Industry experts echo Ahearne's concerns about the sector, with TR Property Manager Chris Turner giving the view that UK commercial property values are likely to fall another 9% by the end of the year and weaken further in 2009.

He said derivative pricing leads him to believe that the sector can fall nearly 10% by January and values are not expected to recover until 2010 or 2011, which will be in very small movements.

"Some investors may want to tough it out, but the outlook for the sector remains bleak, accentuated by the lack of liquidity in the banking system, the downturn in the construction industry, the lack of demand for commercial property and the severe problems now affecting the retail economy," says Ahearne.

Moneyspider.com is designed to appeal to investors at all levels, is a comprehensive yet easy-to-understand fund monitoring tool delivering personalised reports, including valuations and ratings on each investor's individual funds, all updated on a daily basis.

Moneyspider.com has no registration fee and the service not only rates the performance of each of the client's own funds but also shows a comparison with the top five funds in the same sectors. It also shows the top-performing funds from all sectors, so Moneyspider.com investors can see where the real profits have been.

"Keeping a close eye on your fund's performance is crucial in these uncertain times - in rapidly changing market conditions, as we are currently experiencing, knowing how a specific fund in which you are invested is performing and - equally important - how other funds compare, is simply good financial common sense," he added.

Tony Ahearne, Director, Moneyspider Limited.
Tony has been an Independent Financial Advisor for over 30 years. (The above article is based on the author's understanding of the new rules and investors are advised to take their own professional advice.)

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Moneyspider Limited is an appointed representative of Anthony, Bryant and Company (Investment Consultants) Limited which is authorised and regulated by the Financial Services Authority. Warning: past performance is not necessarily a guide to future performance. The contents of this article are not intended, and should not be construed as, advice, a recommendation or as an inducement to buy or sell any investment. Moneyspider relies on information regarding investments that is provided by third parties and accepts no liability (including that arising from negligence) for the accuracy of such information.
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