Some Zurich Property Funds move to an outflow pricing basis

On Monday 19 November 2007 the Zurich Property AP, EP and ZP pension funds and the Zurich Property EL life fund moved to an outflow pricing basis. This has caused unit prices to fall by around 5-6%. The pricing basis for the Zurich Property AL fund and the Sterling Property ZA fund has not changed.

Commercial property prices have fallen over the last three months after a ten-year period of growth. Although this is a common feature of commercial property, it causes some investors to decide to move out of property.

The Zurich property funds are mainly invested in commercial property, but the fund managers keep some of the assets in cash as this gives them a degree of flexibility as money flows in and out of the fund. If the manager is buying property, he will pay the cost of the property and other costs, notably 5% stamp duty. This is reflected in the price to new investors. If too many investors decide to leave the fund, the manager sells property for its market value less selling costs. This is an outflow pricing basis. By moving to this basis we are able to protect those who remain invested in the fund. The movement from one basis to another involves costs of 5-6%.

This move is an accepted way of dealing with this situation and other companies’ funds have done the same in recent months.

Please see the Questions and answers for more information. Please contact your adviser if you need advice. We strongly recommend you speak to your adviser before taking any action.