M&G has extended the gating of its property fund for a third time, saying this was needed to protect the interests of its investors.
In an update to investors yesterday (August 11), the manager of the M&G Property Portfolio said the fund had about £134.3m of assets under offer but sales were not guaranteed.
Its cash position at the end of July was 8.2 per cent after it had sold £155.5m in assets since its suspension.
M&G cited continued "material uncertainty" around the valuation of certain assets and said reopening would depend on both cash levels and the material uncertainty clause being adequately lifted.
But it added the majority of assets in the £2.1bn portfolio - 65.6 per cent or £1.4bn - were no longer subject to this clause.
An M&G spokesperson said: “We are acting in the best interests of the fund’s shareholders – suspension gives us time to raise cash without resorting to fire sale prices. It’s difficult to say when we might re-open given the current uncertain outlook.”
Trading in the M&G Property Portfolio has been suspended since December 2019 due to a wave of redemptions, with investors unable to access their cash.
The fund house cited political and economic uncertainty in the UK leading to increased demand from investors for their cash back as the reason for the original suspension. Investors had withdrawn about £1bn from the fund in the year prior to the suspension.
According to the firm, the fund continues to be actively managed and reported on during suspension and it will continue to waive 30 per cent of the fund’s annual charge “to reflect the inconvenience this has caused our customers”.
The fund's suspension is reviewed on a 28-day cycle and a further update will be provided on September 8 at the latest.
M&G is not the only UK property fund to have been gated. In March, a whole host of funds joined M&G, albeit this time because the coronavirus crisis had caused uncertainty in the market, meaning valuers were unable to value the assets within the funds with the required degree of certainty.
Meanwhile the Financial Conduct Authority is considering new rules which would require investors to give notice — potentially of up to 180 days — before their investment is redeemed from open-ended property funds.
The FCA said there was a “liquidity mismatch” between the underlying property held in such funds and the daily basis in which investors bought and sold units and that the notice period would allow the fund manager to plan sales of property assets so it could better meet redemptions that are requested.
This morning (August 12) M&G reported its pre-tax profits had plunged by more than half in the first six months of the year, amid falling fee revenue and the pandemic-induced market turmoil.
The company said its adjusted operating pre-tax profit had fallen to £309m, down 57 per cent on the £714m posted in the first six months of last year.