Some Zurich Pension Property Funds move back to an inflow pricing basis

On Wednesday 2 April 2008 the Zurich pension property funds moved to an inflow pricing basis. This has caused unit prices to rise by around 6%.

Commercial property prices have fallen over the last nine months after a ten-year period of growth. Although this type of correction is a common feature of commercial property, it caused some investors to decide to move out of the property funds. After the downward adjustments in property values over recent months some investors have decided now is the right time to move back in to the Zurich pension property funds. Consequently, the pension funds do not now have to sell property to raise liquidity and the funds have returned to being a net purchaser of property. This means that the pricing basis of the fund has to be changed.

There may be more falls in property values to come depending on a number of factors and further news from the financial markets.

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 pension fund prices to new investors from 2 April.

This move is an accepted way of dealing with the significant costs of dealing in property and maintaining fairness between different investors entering or leaving the funds.

The pricing basis for the Zurich Property AL fund the Zurich Property EL and the Sterling Property fund has not changed.

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.