The real estate fund with Canada Life (formerly Great West Life) is in many of our portfolios as a special equity fund as it owns actual physical buildings (rather than shares of property companies). It is a unique fund and works well for added diversification. To preserve the integrity of the fund Canada Life reserves the right to limit or impose temporary restrictions on withdrawals and deposits. During the current economic environment it is difficult to properly value real property. Because of this, Canada Life is acting in the best interests of unit holders to preserve the integrity of the fund. We feel this is a very prudent decision and that this is still an excellent holding for portfolios that include the fund. Nothing has changed from this perspective.
We don’t ever suggest this make up a high percentage of any portfolio, so we feel it is a non-issue that there is a temporary hold on withdrawals and deposits. Our portfolios that include this fund will have more than adequate liquidity should the investor require money to be withdrawn. There is nothing to be concerned about, Canada Life has made a solid decision that we agree with.
If you have any questions about how this may impact your portfolio, please don’t hesitate to contact us
Canada Life’s Release
Effective March 20, 2020 at 4:00pm, Canada Life announced a temporary suspension on contributions, transfers and redemptions for its Canadian real estate investment funds
What caused this?
The COVID-19 virus has impacted the global economy, including property markets and has made it difficult to value the property owned by the Funds with the same degree of certainty as usual. This affects the company’s ability to calculate the unit price used to buy and sell units in the Funds, and we believe this gives rise to a material risk to our ability to ensure the unit price will continue to be valued appropriately to ensure that unitholders may buy and sell units at a price that reflects their value.
To mitigate that risk, Canada Life is suspending contributions to, and redemptions and transfers from, the Funds. While the Funds continue to be in a positive cash position and have capacity to increase liquidity through operating cash-flow, asset sales and mortgage financing, there is the possibility of an extended period of redemptions pressure due to the current economic conditions. The current economic climate also raises concerns about the company’s ability to obtain fair market value on the disposition of real estate assets, should it become necessary to do so to meet liquidity demands, which would potentially be detrimental to the long term interests of unitholders. The suspension of redemptions and transfers from the Funds will preserve the current liquidity position and protect our ability to satisfy redemptions when the suspension ends.
What remains the same?
The fund objectives remain the same. These funds hold diversified portfolios of high-quality, income-producing properties. They have performed very well over many years and Canada Life and Great-West Realty Advisors (GWLRA) have expertly navigated temporary suspensions in the past. The real estate funds continue to be an excellent component of a well-balanced portfolio for investors over the long term.