M&G suspends dealings in £2.5bn property fund
The property giant which invests in retail, industrial and office sectors, said it experienced unusually high outflows which have come at a time of Brexit uncertainty and retail downturn.
And given it only held 5% in cash at the end of October, it was difficult for M&G to sell commercial property in response to customer redemptions.
As a result, the fund and its feeder fund have been temporarily suspended. M&G will review this every 28 days and stated it will reopen the fund “as soon as liquidity levels have been sufficiently rebuilt”.
It added that the funds will continue to be actively managed during the suspension but customers will receive a 30% discount on the annual charge.
A statement on its site read: “In accordance with the fund’s strategy, the suspension will allow the fund managers time to raise cash levels to pay redemptions, whilst ensuring that asset sales are achieved at market prices and investors in the fund are safeguarded. In all other aspects, the fund will continue to operate as normal throughout the suspension and customers will continue to receive income payments.”
Ryan Hughes, head of active portfolios at investment platform AJ Bell, said the move comes in the wake of the Woodfood fallout, unnerving investors further.
He said: “M&G has also clearly learnt from the Woodford closure and hopes to deflect attention by waiving 30% of its fee from the outset. How exactly it landed on that 30% figure is unclear, but this is an olive branch to investors who will understandably be frustrated at their money being locked-up.
“The UK property sector has been out of favour with investors, seeing outflows every month for the past year, with investors withdrawing £1.6bn of money during that time. However, it’s important to put this in context, as the three months around the referendum saw £2.3bn of outflows alone.”
Adrian Lowcock, head of personal investing at Willis Owen, said the suspension raises the question of whether illiquid assets should be held in an open-ended structure.
He said: “The open-ended structure simply does not work if the investors in it do not share the same long-term perspective. This should serve as a reminder to investors to only consider open-ended property funds if they are unlikely to need access to their money quickly.”
Following the Brexit result in 2016, a number of property funds froze trading, including M&G.