M&G has become the second asset manager to swing the price of its UK property fund this week, Investment Adviser can reveal, a move which will hit returns by more than 6 per cent.
The switch is an acknowledgement that Fiona Rowley’s £4.7bn M&G Property Portfolio, the country’s largest retail property fund, is unlikely to see material inflows in the near future.
It follows Henderson’s decision to swing the price of its own £4bn fund earlier this week, also revealed by Investment Adviser. Aberdeen Asset Management, meanwhile, moved its property trust from offer to mid pricing in January.
Those changes meant a 5 per cent revaluation for either fund. It is understood M&G’s move will effectively wipe 6.25 per cent off its fund’s value.
The asset manager said in a statement: “M&G has changed the pricing basis of its M&G Property Portfolio and M&G Feeder of Property Portfolio from creation to cancellation as of today [May 12].
“The decision is a reflection of current flows, and is not related to the liquidity position of the fund. It is designed to ensure equitable treatment for both transacting clients and those who remain invested. The pricing basis is monitored on an ongoing basis and is managed in line with fund flows.”
While property funds typically hold double-digit cash weightings in order to preserve liquidity, price swings aim to ensure investors will not suffer from increased transaction costs should assets be sold to meet redemptions.
But the changes will cost those who wish to redeem, at a time when the sector as a whole is grappling with a shift in investor sentiment.
The upcoming referendum on EU membership, and concerns that the UK commercial property market may now be overheating following a strong post-crisis recovery, have both contributed to this shift, according to fund selectors.
The IA Property sector suffered net retail outflows of £119m in February, the most since November 2008. Total outflows for the first quarter stood at £166m.