The managers of the suspended M&G Property Portfolio have raised a further £18m from asset sales, but are unable to set a date for when the fund will reopen.
In an update to investors this morning (February 25) M&G stated it had a further £245m of deals agreed and if they complete the fund would have 16 per cent in cash.
The fund manager stated 80 per cent of the property being disposed of was in the retail sector, leaving the fund with 30 per cent of its assets in this sector.
Tony Brown, global head of M&G Real Estate, said: “We are making good headway in a more liquid market than last year and every effort is being made to ensure we can reopen as soon as possible – we appreciate your patience in this matter.”
A wave of redemptions had led to dealing in the fund being suspended in December over liquidity concerns.
As at the end of January the fund had only 4.8 per cent in cash. Open-ended property funds need to retain large cash balances in case of redemptions, as it takes time to sell property.
FTAdviser previously revealed that property funds, including M&G Property Portfolio, charge a management fee for the cash they hold.
M&G is waiving 30 per cent of the management charge during the period the fund is suspended.
Ben Yearsley, investment director at consultancy firm Fairview, said: “It’s no real surprise that M&G’s property fund is still suspended. With such low levels of cash in December when the suspension started, it was always going to be months and not weeks until full trading resumed.
"Whilst frustrating for existing investors who can’t access their money, a steady approach to disposals is better than a fire sale for raising cash. This continues to show that physical property and open-ended daily dealing funds do not mix in my opinion.”
Tom Walker, who runs the Schroders Global Cities fund, a property fund that invests in the shares of property companies, said while open-ended property funds are not a suitable vehicle for investing in property assets, an older generation of advisers tends to do so.
david.thorpe@ft.com
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