KEY POINTS:
AMP Capital New Zealand says it is suspending redemptions and won't be accepting any new applications into one of its property funds.
It comes just days after the Guardian Trust suspended one of its mortgage funds, prompting fears of a wider run on such investment vehicles.
The fund had about $419m under investment, with about 2900 AMP retail investors involved. Other retail investors in the AMP Capital NZ Property Fund invested primarily through diversified funds.
Just yesterday the NZX-owned fund monitoring and research firm FundSource took the unusual step of putting a hold on its recommendation for mortgage trusts and sent out an alert to hundreds of advisers.
Its move came after research which found investors have pulled close to $300 million out of mortgage trusts and property funds in the last quarter alone and follows decisions by three mortgage trusts to freeze withdrawals in the last two weeks.
The AMP Capital NZ Property Fund is being frozen "in the best long-term
interests of investors," said the company.
AMP Capital said the issue was specific to the AMP Capital NZ Property Fund and the satellite retail funds invested in it. No other AMP investment vehicles were affected.
Managing Director of AMP Capital New Zealand, Murray Gribben, said in a media release: "We've taken this action as a prudent response to the current extraordinary market conditions that have resulted in higher than usual redemptions in the fund,not matched by fresh investment."
"The AMP Capital NZ Property Fund has investments in the AMP Capital
Property Portfolio (APP) and some listed property trusts. The underlying property assets held in APP continue to comprise a high quality, nationwide portfolio of assets that are strongly diversified by location and property type (such as office, retail and industrial). The portfolio has 96 per cent occupancy and includes the government sector as the single largest tenant on long-term leases."
The Fund is permitted to suspend redemptions for up to one year, though AMP Capital says it will lift suspensions as soon as market conditions improve sufficiently.
"Because property is a long-term investment and the assets are not immediately realisable, these types of provisions are common to these types of funds to ensure that the interests of investors are protected during periods of market volatility," said Gribben.
"In the current market, where investors are looking to reduce their exposure to property investments, we believe we are acting in the best interests of investors by temporarily suspending activity to preserve the quality of the fund."
Fundsource spokeswoman Leonie Gordon said climbing redemption rates and the difficulty mortgage trusts had in liquidating assets meant it was not prudent for the firm to be recommending them. "We have put the sector on hold at this point in time."
Fundsource's quarterly report on retail managed funds shows despite strong in-flows into KiwiSaver funds the entire sector continues to shrink with funds under management dropping from $18.85 billion to $18.35 billion between March and June.
Net fund outflows were $391.5 million, significantly more than the previous quarter which saw net outflows of $46.8 million.
A driver was mortgage trusts and property funds. Mortgage trusts saw a net outflow of $213 million during the quarter, more than double the outflow of the first quarter of this year of $85.3 million.
New Zealand property funds also saw a significant increase in net outflows, from $40.4 million in the first three months of the year to $85.3 million for the June quarter.
- HERALD ONLINE/TAMSYN PARKER/NZPA
