RLP Property fund update - Sept 2020

The RLP Property Fund was put into deferral with effect from 30 March 2020 which meant that some transactions were temporarily restricted from the fund.

We can now advise that the restricted period will end on 29 September 2020.

If your scheme or a specific employee's transactions were affected by these restrictions then we will contact you, the employee and your adviser to discuss the next steps.

Please find below a list of questions and answers on removing the restrictions to our Property Fund. If you have further questions then please contact your usual Royal London contact in the first instance. Or visit our Contact us page.

Our property surveyors removed the material uncertainty clause from their valuations at the mid-September valuation date. This follows guidance from the Royal Institute of Chartered Surveyors as property market transactions are returning to pre-COVID levels providing sufficient transactional evidence on which to base valuations.  This means we can remove the restrictions on the fund with effect from 29 September 2020. 

If you have a scheme or specific employee’s transaction that has been restricted and they were are awaiting payment, there may be action required by the employee or your adviser depending on the transaction that has been delayed . We’ll automatically process some outstanding transactions but for some we’ll be seeking confirmation to proceed. The below table highlights what’s happening for each type of delayed transaction.

Transaction typeWhat's going to happenAction required

Transfers -
Partial Payment already paid

We will process the remainder of the payment automatically and confirm this relates to your previous request. Your transaction will be processed using the price on 29 September.

No action required. 

All other delayed transactions

If you requested a transaction that was deferred during the restricted period we will write to you to confirm you still want to proceed. 

Contact us before 6 October to receive the price on 29 September.  Confirmation received after this date will be processed in line with our usual practices.

The fund restricted some transactions as the impact of COVID-19 led to a material uncertainty clause being applied to the valuations of the properties held in the fund. Property market transactions are returning to pre-COVID levels providing sufficient transactional evidence on which to base valuations  and as a result the surveyors (Knight Frank and Cushman & Wakefield) have removed this clause from their valuations of the majority of the properties owned by the fund. This has enabled us to remove the restrictions that have applied over this period.

We are writing to all employees paying regular contributions whose contributions were originally allocated to the Property Fund which have been redirected to RLP Deposit fund during the restricted period. We are removing this redirection and new contributions will now be invested in the property fund again in accordance with customers instructions.

For money redirected to the RLP Deposit fund during this period the following will happen -

  • For employees who have rebalancing on their policy we will automatically move their contributions to their chosen investment split the next time the policy rebalances.
  • For employees without rebalancing the contributions will remain in the RLP Deposit fund unless they take action to move them elsewhere.

We can’t guarantee what will happen in the markets, however we do not expect a significant fall in the value of your employees' investment in the Property Fund when the fund restrictions are removed. We have not seen a significant difference in valuations of properties when the uncertainty clause has been removed.. High quality properties are still in demand and as one of the largest property funds in the market, we are ready to react quickly to any buying opportunities that present themselves.

The underlying fund which provides our customers with property exposure has approximately 10% in cash investments. We are comfortable that customers who are in the queue to exit the fund can do so without causing a liquidity challenge. We will continue to monitor liquidity levels closely as part of our enhanced monitoring process which will remain in place during this time.

We can’t guarantee that this won’t happen again.  Much depends on how the UK continues to emerge from lockdown as the economy reopens and how any emerging secondary outbreaks are contained.  There are also risks that are inherent in accessing Property as a less liquid asset class in comparison to stocks and shares or bonds and cash.  Placing restrictions on the funds is only done when it it’s in the best long-term interests of our customers.

We believe in the diversification benefits that property can add to portfolios over the long term.  Property provides a strong, stable income stream and potential for capital growth that is generally not as volatile as company stocks and shares and provides a higher return than government bonds.

RLP Property is a balanced property fund that invests across the commercial property universe in the UK. It holds around 20% exposure to the retail sector eg high street shops and shopping centres.  This sector has struggled as the transition to online shopping has been accelerated by COVID-19 and some of the retail holdings have dropped in value by 20-30%. This has been offset by stronger performance from other sectors such as industrial holdings e.g. last mile distribution and supermarkets.  Both are areas which have benefitted from customer behaviour in lockdown.

The way in which UK companies and workers have responded to working from home suggests that less office space will be required in the future.  Our view is that the right office space in the right location will still be in demand in a post covid world and that companies will use office space differently going forward. It’s likely that office space will be used for collaboration and creative activities amongst workers with BAU activities taking place in a working from home environment.  We expect this change to support the fund managers strategy of targeting prime offices.

If after reading the FAQs you still have unanswered queries then please contact your usual Royal London contact in the first instance. Or visit our Contact us page.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.