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Kames targets derivatives and property shares for Aegon fund

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Kames Capital is planning to introduce derivatives and property shares to its £968m Aegon UK property fund to increase its liquidity.

The fund currently holds around 10 per cent in cash and head of unit-linked property funds Sarah Cockburn says she wants to increase liquid assets to up to 20 per cent of the fund by buying derivatives and property shares.

She says: “The liquidity strategy of the fund is under review. We are looking to move into liquid synthetics and property shares in addition to our cash weighting this year.

“It is about protecting existing investors against a future market crisis.”

In January 2008, Aegon was forced to suspend redemptions to the property fund due to liquidity issues triggered by the credit crunch before reopening in August 2008.

Scottish Widows Investment Partnership head of wholesale real estate Gerry Ferguson has also increased liquidity in the £2.3bn Swip property trust.

Ferguson has increased the fund’s derivatives exposure from just under 1 per cent to 2.6 per cent over the past six months.

Hargreaves Lansdown senior analyst Meera Patel says: “Using property shares and derivatives is a great way to introduce liquidity into property funds to ensure that if investors want to redeem, they can. Property shares have fallen considerably since the start of the crisis and as the shares have fallen, the yields have come up.”

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