M&G’s £2.4bn property fund will remain suspended while the investment fund manager sells properties to build its cash reserves.
In December, the London-listed asset manager closed the door on withdrawals from its property fund after investors raced to take out money following concerns over Brexit and ongoing difficulties in the retail sector. M&G struggled to sell assets in the fund quickly enough to meet investor withdrawal demands.
The continued suspension comes amid wider liquidity concerns surrounding the investment sector. This week, 300,000 investors with shares in Neil Woodford’s collapsed Equity Income fund were told they would lose at least a fifth of their money as administrators wound up the portfolio.
Ryan Hughes, head of active portfolios at AJ Bell, said: “With cash in the fund at just under 5 per cent at the end of December and a further 7 per cent of the fund currently under offer, the portfolio managers will want levels to be much higher before they are in a position to reopen.”
He added that M&G managers will be very “conscious to ensure there is a sufficient cash buffer following the reopening, as the last thing they want is for the fund to have to suspend again if redemptions accelerate”.
In a statement on its website, M&G said the continued suspension would allow the property fund’s managers to carry on raising cash to meet client demand for redemptions, “while preserving value for the fund’s shareholders in the long term”.
Jack Daniels, chief investment officer of M&G, added: “Historically, we have held a low cash buffer in the conviction that our customers pay us to invest their money, not to keep it idle — particularly in times of near-zero cash interest rates.”
Ben Yearsley, director at Shore Financial Planning, said investors will have to wait for another two or three months for the fund to reopen.
“I think M&G is a bit unlucky, they will probably be the only property fund to suspend — as since the election there has been more interest in UK property and UK investments more generally,” he added.
In a sign of growing awareness of investor frustration with the suspension or gating of funds, M&G has said it will waive 30 per cent of its annual charge to investors.