M&G lifts property fund suspension

Added 21st October 2016

M&G Investments has announced it will resume trading in the shares of the £4bn M&G Property Portfolio and its feeder fund at noon on Friday 4 November.

M&G lifts property fund suspension

The announcement follows similar moves made earlier by M&G’s peers such as Standard Life Investments and Columbia Threadneedle. The fair value adjustment applied on 1 July 2016 has also been removed in full. 

The temporary suspension was announced on 5 July 2016 after investor redemptions from UK property funds spiked in the wake of the Brexit vote. M&G said that ‘as confidence returns to the market’ it has been able to sell, exchange or place under offer 58 properties for a total of £718m ($880m, €803m).

Chief executive of M&G Securities William Nott said: “Suspending the fund wasn’t a decision we took lightly, but we felt it was the only way to protect the interests of investors in what were very unusual circumstances in the aftermath of the referendum.

Suspension created an environment more akin to normal conditions, allowing us time to choose the most appropriate assets to sell at the right price in order to preserve the integrity and future of the fund. As such, the fund manager has kept higher quality assets while reducing the exposure to assets deemed riskier than their prime counterparts, putting the portfolio in a good position for any further volatility that may be experienced in the lead up to Brexit.”

“The initial shock of the Brexit vote hit the property sector hard, however over the last few months we have seen the market stabilise and return to normality,” noted Adrian Lowcock, investment director at Architas. “The ability to suspend funds has largely worked and protected investors by giving managers the time to decide which properties to sell and to get the best possible price for those assets.”

“The impact of the summer freeze on property funds is that many managers are likely to retain larger cash positions to try and avoid having to suspend funds again if the sector sees more large withdrawals,” Lowcock added. “Property can play a useful role providing diversification, however investors should only consider investing in property funds for the longer term and be willing to accept that fund suspension is one of the risks that come with investing in the asset class.”

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Alex Sebastian

News editor

Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.

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