M&G suspends trading in £2.5bn property fund amid Brexit and retail woes
The investment giant said it has seen ‘high and sustained outflows’ in the fund, which covers 91 UK commercial properties.
M&G Investments has suspended trading in its £2.5 billion property fund after a rush of investors sought to cash out amid Brexit uncertainty.
The FTSE 100 firm said it saw “high and sustained outflows” after the fund was hit by “Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector”.
M&G said uncertainty made it more difficult to sell property assets to meet redemption requests from investors in its property portfolio.
It said the property fund will be actively managed during the suspension but has decided to waive 30% of its annual charge.
Industry tracker Morningstar said in October that around £750 million was drawn out of M&G’s property portfolio during the first eight months of 2019.
The company, which only debuted on the London Stock Exchange in October after its long-awaited split from Prudential, said it has reached a point where it felt the suspension was needed to “protect the interests of the funds’ customers”.
It said it is continuing with its current strategy of attempting to raise cash levels sufficiently to pay redemptions, while assuring investors that asset sales are “achieved at market prices”.
The FCA is working closely with the firms involved to ensure that timely actions are undertaken in the best interests of all the fund’s investors Financial Conduct Authority
M&G said orders made after midday on Wednesday will not be accepted until the suspension is lifted.
The fund covers investments in 91 UK commercial properties in the retail, industrial and office sectors, which were valued at a total of £2.54 billion at the end of October.
M&G previously suspended dealing in its property funds prior to the Brexit vote in June 2016, alongside a number of other investment managers.
The news of its suspension comes five months after celebrity stock-picker Neil Woodford suspended his flagship fund after seeing a spike in outflows.
Figures for October showed that investors pulled £12.5 million from property funds each working day during the month as they became increasingly cautious over the sector.
A Financial Conduct Authority (FCA) spokesman said: “The decision to suspend was made by the fund’s authorised corporate director, in conjunction with the depositary.
“This is to allow the fund time to raise liquidity levels and preserve value for investors through orderly asset sales.
“The FCA is working closely with the firms involved to ensure that timely actions are undertaken in the best interests of all the fund’s investors.”
Patrick Connolly, chartered financial planner at Chase de Vere, said: “While the M&G fund is suspended, most other providers have far greater liquidity, and less exposure to retail properties, and so are better placed to meet redemptions, as long as there isn’t a mad rush to the exit door
“Property still remains an asset class which can play an important role in investment portfolios and, when we have some real clarity on Brexit, the prospects for this asset class will hopefully improve.”
Shares in the company slumped 1.7% to 227p following the announcement.
A spokesman for Aviva, one of the other fund managers that suspended a fund in 2016, said it has “pro-actively built cash levels in the Aviva Investors Property Fund”. These are now at around 30% after it made several sales over the summer.
“We are in a period of heightened market uncertainty and believe this is an appropriate level given market conditions. Robust liquidity management remains a key priority for the fund managers.”
A spokesman for Janus Henderson, another asset manager, said: “We confirm that the Janus Henderson UK Property PAIF and Feeder fund remain open.
“Since 2016 we have managed the fund to ensure that we continue to have a diverse portfolio of high quality properties for our investors and hold a higher level of cash in the face of continued political and market uncertainty.”