M&G suspends £2.5bn property fund as assets plummet
Following waves of outflows
The M&G Property Portfolio has been suspended following "unusually high and sustained outflows", with the fund’s AUM declining by roughly £1bn since the start of the year.
In a statement on Wednesday (4 December) M&G blamed "Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector" for its inability to sell commercial property at the rate required to meet investor redemptions.
Total AUM has fallen by 27.9% since the start of the year, falling from £3.5bn to £2.5bn over the period, according to FE Fundinfo. Performance has also suffered over the course of 2019, with the fund down 7.8% over one year to 4 December, compared to an average loss of 0.1% for the IA UK Direct Property sector.
The fund was one of a number of vehicles in the sector that suspended in the wake of the 2016 Brexit referendum, which saw investors rush to pull money from the illiquid asset class.
It was estimated at the time that well over half the £25bn IA property sector was frozen. Fund managers have been keen to avoid this happening again and as a result have been amassing large cash positions in their portfolios.
M&G told investors that the fund will continue to be actively managed throughout the suspension, but "in recognition of customers' temporary inability to access their investment", the firm will be waiving 30% of its annual charge, which will end when the fund resumes dealing.
The suspension, which was decided upon by the fund's authorised corporate director M&G Securities in agreement with the fund's depositary and the Financial Conduct Authority, will be monitored daily and reviewed every 28 days.
M&G said the suspension "will only continue as long as it is in the best interests of our customers, reopening as soon as liquidity levels have been sufficiently rebuilt", with investors kept notified via the firm's website.
The firm added: "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."
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