Real estate funds’ suspension lifted

By Donna Glasgow | September 21 2011 08:01PM

As of Oct. 17, the suspension on switches and withdrawals from the Canada Life and Great-West Life Real Estate Funds is expected to be lifted. The suspension has been in effect since Dec. 15, 2008. The lifting of the suspension is due to improved liquidity in the fund. “Right now, as of August 24th, the cash position of the fund was approximately $474 million. That represents 19.4% of the funds’ net fund value of about $2.4 billion,” said Alf Goodall, senior vice-president, individual marketing, for Great-West Life, London Life and Canada Life during an interview with The Insurance and Investment Journal.

The Great-West Life and Canada Life Real Estate Funds are separate funds offered by two different insurance companies, which are owned by Great-West Lifeco. Both real estate funds participate in the same collection of assets.

The funds were frozen in 2008 because cash reserves were running low. Managers chose to lock up the fund rather than liquidate assets at fire sale prices during an unfavourable market.

During the suspension period, there were two payout periods where clients could request switches or withdrawals. “We paid out 100% of eligible requests during the two payout periods.” Because of this, Mr. Goodall does not anticipate an unusual level of switches or withdrawals once the suspension is lifted.

He adds that the suspension period was a very challenging time and he expressed gratitude for client and advisor support. He adds that by taking the suspension measure, the fund managers’ actions were able to create liquidity for those who needed it in the short-term, while maintaining the integrity of the product for those who want to stay invested over the long-term. “I would say that’s actually the result we were focused on and that’s the result that we believe we created.”

Taking “courageous” action during a difficult time has helped the funds earn investors’ confidence, stated Mr. Goodall. “This is why you hire professional investment managers. This is exactly what you want them to do and as challenging as it was, I think that was an important lesson for everyone involved.”

Since 2008, the funds’ performance has been “pretty exceptional” compared to the stock market, he added. If an investor put in $10,000 before suspension they would now have $10,852. “If you were in the Canadian stock market, you’d probably still be under water.” This return applies to net returns of the Great-West Real Estate Fund. It would not be the return of every unit holder since there are multiple series, but it gives a good indication of the overall performance, he explained.

GWL Realty Advisors, Inc. manages the Great-West Life, Canada Life and London Life Real Estate Funds. The suspension on the London Life Real Estate Fund was lifted last March. London Life is also a Great-West Lifeco subsidiary.