M&G to reopen property fund after 17-month suspension

James Baxter-Derrington
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M&G to reopen property fund after 17-month suspension

M&G Investments will reopen the M&G Property Portfolio and its feeder fund at midday on 10 May 2021, more than 17 months after it first pulled down the shutters.

Over the course of the suspension, the managers have exchanged or sold 38 properties for a combined discount to net asset value of 0.1%, of which more than a third were retail properties.

This has brought the cash level to 33.2%, which the authorised corporate director and depositary of the fund believe is a "suitable liquidity position" to meet redemption requests and protect investors who wish to remain invested.

We deeply regret the inconvenience that suspension has caused our customers and clients."

Due to the rebalancing caused by an attempt to raise liquidity, the fund is now overweight to industrials and has seen its retail exposure fall from 38.4% to 28.1%.

From 25 June, the portfolio will change to dual pricing on a full spread basis to "provide greater clarity, reduce the potential for large price fluctuations and provide stronger alignment with the fund's long-term horizon".

It will also seek to maintain a 20% cash weighting during normal market conditions to "enhance liquidity management".

The fund will see its investment objective and policy updated from 25 June 2021, with the objective changing from "maximis[ing] long term total return" to "provid[ing] a higher total return" net of fees than the IA UK Direct Property sector over "any five-year period".

The investment policy will include a clause that direct investment in commercial property may be reduced to 60% of the fund "if it is considered prudent for liquidity management".

M&G has waived 30% of the annual charges on the fund since it began its suspension "in recognition of the inconvenience cause to customers and clients" and will continue to do so until its 10 May reopening. It will waive fees on cash over 20% until the end of 2021.

A "rapid sales provision" will also be added to the prospectus which clarifies the fund may, in exceptional circumstances, need to sell assets below market value, which would result in the value of the company being reduced.

Since the fund began its suspension, co-manager Fiona Rowley has stepped down from the fund, leaving Justin Upton as the lead manager, supported by assistant fund manager James Mieville.

Laurence Mumford, chair of the fund's ACD, M&G Securities Limited, said: "We deeply regret the inconvenience that suspension has caused our customers and clients.  The decision to suspend was taken to protect the interests of all of our investors, enabling the fund manager to sell assets in an orderly fashion.

"We believe this has preserved value for customers, while also maintaining the integrity and future prospects of the fund."

The Royal Institution of Chartered Surveyors began to remove some property sectors from its recommendation of material valuation uncertainty in May 2020, before calling for a general lifting on 9 September.

The same day, St James's Place reopened all its property funds for redemptions and creations, and was followed by Columbia Threadneedle on 17 September, Royal London Asset Management on 30 September, Legal & General Investment Management on 13 October, Aberdeen Standard Investments on 16 November and BMO Global Asset Management on 14 December.

Janus Henderson Investments reopened its fund on 24 February 2021.

To date, the property funds of Aegon and Aviva all remain suspended, with respective cash levels of 23% and 22.7%, according to the most recent factsheets.

First published by our sister title Investment Week