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Bingley Bloke

Panic Selling Hits Property Funds

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Guest The_Oldie

Well found. I read this in the paper this morning, but couldn't find it on their web site.

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Norwich Union's Property unit trust and New Star's Property Unit Trust between them hold nearly £7 billion for private investors. But from today Norwich Union's investments will be worth 4.72% less while New Star's will be worth 3.9% less as the fund managers try to stem massive withdrawals.

panic stations!! :o

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WARNING - PROPERTY INVESTMENT MAY DAMAGE YOUR WEALTH

When I first saw a poster for New Star's REIT my first thought was that it was a spoof, designed only to coax investors away from property

It said somthing along the lines of this:

'Invest in bricks and mortar'

Estimated return 3.8% (below base rate)

Then this bit:

Return quoted is an estimante the value of your investment may rise or fall in response to market variations etc.

The last bit was in big letters on a coloured band at the botom of the advert, it reminded me only of a health warning on a fag packet!!

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Always reminds me of "It's a wonderful life"

GEORGE: No, but you . . . you . . . you're thinking of this place all wrong. As if I had the money

back in a safe. The money's not here. Your money's in Joe's

house . . .

(to one of the men)

. . . right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others.

Why, you're lending them the money to build, and then, they're

going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?

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The penalties these property funds are imposing on any withdrawals currently around 5-6% are the same as the MVA's { market value adjuster } insurance and with profit bondholders were faced with in 2002 , they too started at around 5-6% ,but by the end of the stock market correction the MVA's were over 30% for some policy holders as they tried to exit these funds . These property funds will soon also have withdrawal penalties of a around 30 % as well imo :)

Edited by grey shark

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A lot of investment funds are herd followers, rarely do I see one leading the curve. If you think about it these funds find it far easier to sell / market themselves on the back of evidence - ie past performance, but this is counter intuative for someone such as myself - a contrarian.

For some reason Im unable to fathom I got some stick for saying this previously. To those critics of my contrarian thinking, please be my guest and CARRY ON 'INVESTING' ON THE BACK OF PRICE ACTION RATHER THAN SOUND COMMERCIAL BUSINESS SENSE.

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I wonder if they spell this out in their glossy brochures.

"If, at any time, you want to take your money out, we might have to sell a building and pay stamp duty (always thought buyers paid the stamp duty) and, to be fair to people not taking their money out, we will have to give your holding a bit of a spanking.

Our fund is effectively a valve - the money goes in easily enough but it is a bugger to get out. Yet, and we do admit this is a strange anomaly, when we need to levy our 3.5% annual management charges - we have no trouble at all accessing your money.

You have been warned. If you still want to invest, please move over into the "Sucker's Queue" on the left. I thank you."

Edited by Lets' get it right

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Small private funds can be ok but the large bread butter packaged property investments are just not for me.

If you want a pound I want a brick.

I argued with a fund manager recently as to why they persist with UK and US property. The guy was just totaly oblivious to new markets (for example German commercial property at 80% less than UK commercial), and as so often the case the experts cant see the wood for the trees.

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I wonder if they spell this out in their glossy brochures.

"If, at any time, you want to take your money out, we might have to sell a building and pay stamp duty (always thought buyers paid the stamp duty) and, to be fair to people not taking their money out, we will have to give your holding a bit of a spanking.

Our fund is effectively a valve - the money goes in easily enough but it is a bugger to get out. Yet, and we do admit this is a strange anomaly, when we need to levy our 3.5% annual management charges - we have no trouble at all accessing your money.

You have been warned. If you still want to invest, please move over into the "Sucker's Queue" on the left. I thank you."

I wonder how some of these things can even be legal.

#Invest your money with us, but once you have, we reserve the right to introduce potentially unlimited charges if you ever want it back.

#If you decide to sell your units, we hereby reserve the right not to pay the current market value i.e you either paid more for your share of the assets than those asssets were worth at the time, or you haven't had your true % stake in the fund reimbursed.

Surely the point of these funds is that they are valued according to the underlying assets (shares, bonds or commodities), not the demand / supply of speculators trading the actual fund shares?

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I wonder how some of these things can even be legal.

#Invest your money with us, but once you have, we reserve the right to introduce potentially unlimited charges if you ever want it back.

#If you decide to sell your units, we hereby reserve the right not to pay the current market value i.e you either paid more for your share of the assets than those asssets were worth at the time, or you haven't had your true % stake in the fund reimbursed.

Surely the point of these funds is that they are valued according to the underlying assets (shares, bonds or commodities), not the demand / supply of speculators trading the actual fund shares?

These funds work like this,

You all give me £100 each, I then in return give you 10% income a year thereafter, but don't expect it back cos guess what folks, I'm using the income from future suckers joining to pay you, mmm <_<<_<

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I wonder how some of these things can even be legal.

#Invest your money with us, but once you have, we reserve the right to introduce potentially unlimited charges if you ever want it back.

#If you decide to sell your units, we hereby reserve the right not to pay the current market value i.e you either paid more for your share of the assets than those asssets were worth at the time, or you haven't had your true % stake in the fund reimbursed.

Surely the point of these funds is that they are valued according to the underlying assets (shares, bonds or commodities), not the demand / supply of speculators trading the actual fund shares?

Have you never heard the expression 'legalized robbery'? Well that is what this is.

Market Value Adjuster ... what a wonderful expression that is.

'Yes Mr. Jones the price of the units is £10.00 at the moment. What's that? You want to SELL some, oh sorry, I thought you wanted to BUY some. Well, if you're selling we have to apply a Market Value Adjuster - which helps us get the actual market value - heh, heh! - and that means you'll get £9 for each unit.'

'So you're selling something for £10 that has a market value of £9. That's right isn't it?'

'Well I wouldn't put it quite like that Mr. Jones - if you leave your money in the fund it will almost certainly be worth a lot more in the future - even after we've nicked 3.5% a year out of it for doing absolutely, bloody nothing. It's a tough job but someone has to do it!'

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, but this is counter intuative for someone such as myself - a contrarian.

Missing out on 89.4% returns over the past 5 years is a good thing?

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So the lesson is:

Panic early, get your money out before the herd.

VMR.

Too true. You can bet your last penny that the people in the investment banks etc who are telling you that recent problems with property backed securities are 'contained' and that there is no reason for alarm, are the same ones that are desperately trying to unload their holdings before TSHTF.

Edited by up2nogood

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