British Property Prices continue to decline and Aviva Freezes withdrawals from Fund

Norwich Union, who recently changed their name to "Aviva," have put a freeze on investor withdrawals from their "Norwich Union Unit-Linked property fund." The excuse they have given is that they do not have any money and want to liquidate some of their assets by selling some of the property into what has to be the worst commercial property market in the last twenty years. Good luck getting your money back if you "invested." any money in this one.

As if to rub salt in the wounds of angry investors with absolutely no recourse, Aviva are running possibly one of the most obnoxious and condescending Television advertising campaigns in the history of condescending advertising campaigns, explaining to us simpletons that the name change is a vital part of "showing the world what you have always wanted to be."

As far as I can tell, what Norwich Union have always wanted to be is a meaningless five letter word that cost hundreds of thousand of investor's hard earned pounds. I am sure Alice Cooper was happy for the work though.

This is not the first fund frozen by Aviva and follows on from a glut of similar freezes by other funds. Unit trusts of this type are being frozen all over the world, locking investors into depreciating assets to protect the fund itself.

In December, UBS froze their "UBS Wealth Management Global Property Fund" until the end of 2009. In October, the Australian funds began freezing with more than 30 funds being frozen until such time as "investor sentiment in financial markets improved substantially." Several German funds extended their freeze on redemptions this week.

Aviva claim they have only frozen the fund for six months. realistically, this fund, like any of the others is actually frozen indefinitely. 2009 is shaping up to be a far worse year than 2008 and there is already a glut in commercial property all over Europe and the UK.

One big question arises from these freezes -  Who exactly is being protected here. The fund managers or the investors? Commercial property prices are not going to recover any time soon and one could be looking at a several year's long freeze. All the while, running costs are being charged to the fund by the managers and surely it would be better to liquidate these funds as soon as possible.

"Between a rock and a hard place," is the expression that comes to mind. Attempting liquidation in this market will result is substantial losses, but freezing the funds will result in substantial magement charges to the fund and an inevitable loss at some point in the future. We would be selling any not-yet-frozen funds ASAP. This is going to drag on for years. Cut your losses, get out and look to re-enter at such time as bottom has been reached. When that will be is anyone's guess.....