M&G Property fund closure no reason to panic investors told

The city of London is seen from the Broadway development site in central London Britain

The city of London is seen from the Broadway development site in central London Britain

M&G said uncertainty made it more hard to sell property assets to meet redemption requests from investors in its property portfolio.

The company said it had been unable to cope with demands from investors for their money to be returned and was suspending its £2.5bn M&G Property Portfolio, which owns office buildings and shopping centres.

"In recent months, continued Brexit-related uncertainty and ongoing structural shifts in the United Kingdom retail sector have prompted unusually high outflows from our property fund for retail investors", M&G said in a statement.

"Given these circumstances, we have now reached a point where M&G believes it will best protect the interests of the Funds' customers by applying a temporary suspension in dealing", the company said. In the aftermath of the Brexit referendum in 2016, M&G's fund was shut from July to November, as panicked investors fearing a collapse in values were prevented from withdrawing their cash.

The suspension will be monitored daily, formally reviewed every 28 days and 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. This fund has not had problematic performance, but it is invested in an inherently illiquid asset class and therefore redemptions need to be dealt with through an orderly sale process.

A spokesman for Janus Henderson, another asset manager, said: "We confirm that the Janus Henderson UK Property PAIF and Feeder fund remain open". The firm has written to investors to explain the current situation.

The news of its suspension comes five months after celebrity stock-picker Neil Woodford suspended his flagship fund after seeing a spike in outflows.

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The M&G case will make the case stronger for regulators to take a tougher stance on these types of investments.

Yet financial planners have mixed views on whether the M&G suspension could be matched by other funds in the sector.

Investment Association flows figures show investors have pulled £902m from property funds in the year to date with April suffering the biggest monthly net redemptions with £338m exiting the sector.

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 monetary adviser Chase de Vere informed traders to not panic, however added: "M&G has struggled with this as a outcome of variety of traders cashing out and a comparatively excessive publicity to retail properties, that are proving tough to promote".

"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". Brian Dennehy, co-founder of independent financial advisers Dennehy Weller, said: "The rush by "the smart money" [eg multi-managers, discretionary mangers, various pension funds] to sell property funds the day after the Brexit referendum wasn't a smart thing to do as it forced prices lower and triggered fund suspensions".

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