Are Canadian mortgage/real estate funds at risk

[Bylo Selhi]

Moratorium trend to be continued

Yesterday, Great-West Life Assurance Co. announced a moratorium on redemptions from two Canadian real estate funds with a combined value of $5.6 billion...

Will this trend continue?

It could, if stock markets stay in the doldrums for another few months. Several Canadian real estate funds froze redemptions in a market slump in the late 1980s. They later closed down.

Great-West Life was one of the few left holding a portfolio of income-producing properties.

Its two segregated funds (Great-West Canadian Real Estate Investment Fund No. 1 and the London Life Real Estate Fund) have a guarantee that protects investors from a loss on their principal...

[asdfvcx]

I believe that fund owns actual properties. So does one of my pension fund clients. They told me that buildings are valued only annually, near fiscal yearend. GWL might have the same practice and a fiscal yearend of Dec 15 or Dec 31.

Thanks for the info, it makes sense. I know the fund does hold actual properties, and when I looked at it a couple of months ago I was surprised to see that its NAV was still rising.

I guess I should have investigated a bit more at the time to see how the fund actually works, but it's only a very small portion of my portfolio, so I've never paid it too much attention.

[tightwad]

More real estate funds frozen