Standard Life defends shutting property fund as it chalks up another profits increase

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Standard Life has defended closing its property fund by saying it prevented commercial property markets from going into a post-Brexit tailspin.

The insurer, which sponsors tennis ace Andy Murray, was the first to gate its real-estate funds and stop investors redeeming their cash after a spike in requests in early July. 

Other property funds quickly followed suit, raising questions about whether it was the right move.

Chief executive Keith Skeoch said the ability to shutter funds was a vital tool to stop a “fire sale” in the market.

“There were other funds which were closing but announcing it later. The closure is a mechanism which allows a circuit breaker to go into the system and avoid a fire sale of property. 

“It allows commercial property markets to remain open. Standard Life has several property funds and we only closed one of them,” he said. The fund is still closed, he added.

Rival Legal & General, which cut the value of property funds days later, kept some of the fund in investments which could be sold quickly for cash, a strategy which “worked well”, finance boss Mark Gregory said. “We had it in a defensive position and others had less liquidity,” he added. 

The ruckus failed to dent the strong growth of both insurers, which followed the lead of rivals Aviva and RSA last week by posting double-digit growth in profits.

Standard Life, which announced a deal to take a freshly-minted stake in one of India’s biggest insurers HDFC Life, saw pre-tax operating profits rise 18% to £341 million. 

L&G also posted a rise in statutory operating profits, up 10% to £822 million.

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August 9, 2016 |
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