M&G suspends £2.5bn property fund, blames Brexit

M&G Investments on Wednesday suspended dealing in its £2.5 billion open-ended UK property fund as it blamed Brexit uncertainty for an increase in requests from investor to cash out. 

The fund company said outflows from the M&G Property Portfolio have coincided with a period of continued Brexit-related political uncertainty.

M&G Investments also said ongoing structural shifts in Britain’s retail sector had made it difficult for it to sell some of its largest assets. 

“Given these circumstances, we have now reached a point where M&G believes it will best protect the interests of the gunds’ customers by applying a temporary suspension in dealing,” it said. 

The funds will continue to be actively managed in suspension, M&G said, adding it would waive 30% of its annual charge until dealing resumes. 

M&G said the temporary 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.

“While bricks and mortar property acts as a portfolio diversifier that also provides an income, we’ve continually flagged there’s a mismatch between its illiquid structure and a daily dealing fund,” said Jonathan Miller, head of fund research at Morningstar.

“There hasn’t been enough of a buffer here, nor the ability to swiftly sell assets to meet redemptions. 

“Even though M&G is waiving part of the management fee during the suspension period, we can’t be far away from the regulator stepping in regarding issues in this space.”

Adrian Lowcock, head of personal investing at Willis Owen, said: “Of course this will, once again, raise the question of whether illiquid assets should be held in an open-ended structure. 

“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.”