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M&G continues property fund suspension as it posts profit slump

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12/08/2020
The M&G Property Portfolio will remain suspended, as the asset manager posted pre-tax profits of £309m in the first six months of the year – down 60% from 2019’s figure.

The fund was suspended in December 2019 due to high levels of withdrawal requests by investors at a time of Brexit uncertainty and structural shifts in the UK retail sector.

And as the coronavirus pandemic evolved causing fresh market uncertainty, M&G has continued its suspension of the property fund on a month-by-month basis.

It confirmed around £134.3m of assets are under offer for sale, though added there’s no guarantee transactions will complete.

Re-opening the fund for dealing will depend on cash levels – 8.2% as at end of July – as well as the ‘Material Uncertainty Clause’ being adequately lifted. Currently, the fund’s independent valuer, Knight Frank, applies this clause due to reduced transactional evidence available on which to base valuations.

As of last month, the clause no longer applied to central London offices and professionally managed, institutional grade student accommodation, and it was also removed for UK industrial and logistics properties in June.

M&G confirmed a total of £1.1bn of the fund’s direct property assets are no longer subject to the Material Uncertainty Clause, equating to 58.4% of the fund’s net asset value as of 31 July.

The fund’s current size stands at £2.1bn. The fund continues to be actively managed and it continues to waive 30% of the annual charge “in recognition of the inconvenience caused to clients and customers”.

Half year profit slump

M&G plc posted operating profit of £309m in the first six months of this year, down from the £714m reported in 2019. It’s also a sheer drop from the £1.1bn reported for the year ended 31 December 2019.

Assets under management and administration (AUMA) reduced to £339bn, reflecting negative market movements in March.

It confirmed an interim dividend of £155m, equal to 6p per share, in line with its policy of paying one-third of the previous year’s final dividend.

John Foley, chief executive of M&G plc, said: “This has been a resilient performance in extremely difficult times, with the value of our diversified business mix coming through strongly.

“Despite the disruption caused by the pandemic, net new money has flowed into our Institutional Asset Management business, while our UK retail savings franchise, anchored on our unique PruFund offering, has remained in positive net inflow.

“Outflows in Retail Asset Management declined in the second quarter, as performance rallied. Work is underway here to further improve returns and customer value.”

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