Thursday, December 20, 2007

Another Rock?

Friends Provident suspends withdrawals from £1.2bn property fund

The global credit crunch claimed another victim today as Friends Provident suspended withdrawals from its £1.2bn property fund, prompting fears that billions of pounds held in unit trusts are now under threat. The insurance group said that investors in the fund, numbering in total 118,000 people, will not be able to access their money for up to six months. It blamed the suspension on a "general sharp decline" in the commercial property market "brought about by the credit crunch". Sound familiar? I suspect like the "Rock" the investors will prefer to make their own decisions and attempt to withdraw

Posted by canalcop @ 05:18 PM (2966 views)
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One thought on “Another Rock?

  • Weren’t we just discussing this earlier – how we can expect “runs” on non-bank financial institutions?

    “The fund invests in office blocks and retail developments and usually holds a cash ‘buffer’ of around 10-15% of total assets to meet demands for withdrawals. But it said this morning that the cash buffer had fallen to 5% following a wave of redemptions, giving the company little choice but to suspend the fund.”

    This is almost the same problem that brought Northern Rock to its knees – savers/investors scrambling for their cash which the bank/fund has secured against long-term illiquid investments. Fortunately for the government, Friends Provident doesn’t have high-street branches outside which embarrassing queues might form, and which make for worldwide television footage.

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