M&G Investments has suspended trading in shares of its M&G Property Portfolio fund, citing “unusually high and sustained outflows”.
The fund house said the outflows “have coincided with a period where continued Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector have made it difficult for us to sell commercial property”.
The fund, which targets retail investors, has 91 properties across the retail, industrial and office sectors, managing assets of £2.54bn as of the end of October.
The suspension will be monitored daily and formally reviewed every 28 days, M&G said, without giving a timescale for trading to begin again. The firm added that the fund will continue to be actively managed in suspension and that it will waive 30% of its annual charge.
“In accordance with the fund’s strategy, the suspension will allow the fund managers time to raise cash levels to pay redemptions, while ensuring that asset sales are achieved at market prices and investors in the fund are safeguarded,” M&G said.
UK property funds have seen net monthly outflows consistently since October 2018, according to fund transaction network Calastone.
The Financial Conduct Authority launched a consultation into funds investing in illiquid assets such as real estate after several property funds closed to investor withdrawals in 2016. The “gating” of those funds came in response to a spike in redemptions following the UK’s Brexit vote.
The FCA is introducing a new category of “funds investing in inherently illiquid assets”, or FIIAs, under which funds will be required to file increased disclosure on how they manage liquidity and publish liquidity risk contingency plans.
Shares in such funds will also be suspended if an independent valuer believes that there is “material uncertainty” about the value of more than 20% of a fund’s assets. The rules come into effect next September.
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