Investors withdraw £800m from M&G property fund

Investors withdraw £800m from M&G property fund

Investors have withdrawn £800m from M&G’s property portfolio and feeder fund since they re-opened for dealing on May 10.

According to data from Morningstar, £789m was withdrawn from the main fund in the past four weeks.

This was met by the fund's liquidity, which has been supported by some recent sales.

The property fund’s value was around £2.1bn before the re-opening. At the time, the fund’s authorised corporate director and its depositary said the fund’s cash weighting was 33 per cent, which translates to about £709m.

The fund had a further £253m of assets which were exchanged or under offer, which have all now sold, and it can generate a further £73m from investments held in a REIT, which can be sold down quickly to generate further cash.

During the fund’s gating, around 38 properties were unloaded at a combined -0.1 per cent discount to net asset value, which reduced the portfolio’s exposure to retail from 38.4 per cent to 28.1 per cent and pushed it overweight industrials. The fund continues to target 20 per cent liquidity.

M&G Investments did not want to comment on fund flows outside of reporting periods but said they have been consistent with expectations.

"In May, the fund delivered a positive 0.8 per cent return and is in the second quartile year to date for the IA UK Direct Property Sector as the sales have been accreted to performance,” it said.

At the time of the fund's reopening, Laurence Mumford, chairman of the fund’s ACD, M&G Securities, said: “We deeply regret the inconvenience that suspension has caused our customers and clients. 

"The decision to suspend was taken to protect the interests of all of our investors, enabling the fund manager to sell assets in an orderly fashion. We believe this has preserved value for customers, while also maintaining the integrity and future prospects of the fund.”

Open-ended property funds have been under scrutiny from the Financial Conduct Authority after the majority gated for withdrawals due to economic uncertainty during the pandemic.

Last month the FCA postponed its decision on notice periods for open-ended property funds while it looks into creating a new fund structure to address the issue.

The watchdog has released the results of its previous consultation on fund notice periods - which included a suggestion that investors in open-ended property funds could have to wait 180 days to get their money back.

But it has said it needs more time to receive feedback on a new structure it is proposing to solve the issue - the long-term asset fund.

This concept was first outlined by the Investment Association in 2019 and is a new open-ended fund structure designed specifically to facilitate investment into long-term, illiquid assets. 

The FCA is now consulting separately on the LTAF and says it will not confirm specific property fund rules until that consultation has been completed.