M&G re-opens property fund after 17 months

A number of property fund managers have raised concerns over the regulator’s proposal to introduce longer notice periods for redemptions, claiming this could reduce consumer choice and create problems for other parts of the market.

Investment analysts have commented that longer notice periods would cause investors to pivot to real estate investment trusts which are seen as more aligned with the illiquid nature of property.

Hughes added: “The consultation closed in November 2020 but as yet no findings and rule changes have been announced, although the key element of the consultation was the potential need to give up to 90 days’ notice to redeem your investment.

"This will have major implications for investors should this change be confirmed but ultimately would likely stop the huge liquidity mismatch risk that got not just M&G but the whole open ended property sector into this mess in the first place.”

Moira O’Neill, head of personal finance at Interactive Investor, said: “Whatever the outcome of the review, investors who have been stung by property fund suspensions could be forgiven for avoiding open ended property funds in the future on the basis of ‘Fool me once, shame on you. Fool me twice, shame on me’.

"There’s no guarantee that the FCA’s proposals will solve the issue entirely so we would suggest investors keep an open mind and consider alternatives."

M&G has also announced it will make several changes to the funds, including the pricing methodology which will change to dual pricing on a full spread basis from June 25.

In a statement, the firm says this will provide “greater dealing clarity, reduce the potential for large price fluctuations and provide stronger alignment with the fund’s long term horizon”. The measures also include allowing the actual property exposure to fall to 60 per cent in exceptional circumstances.