One of the UK’s biggest property funds, which owns shopping centres across the country, has alarmed investors by banning withdrawals and blaming both Brexit and the retail downturn for its problems.
The £2.5bn M&G Property Portfolio was suspended after “unusually high and sustained outflows” – demand from investors for their money back – prompted by “Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector”.
M&G admitted it had been unable to sell commercial property fast enough to fund the rush for the door by investors, leaving it with no choice but to prevent further withdrawals.
The fund’s biggest holdings include shopping centres such as Fremlin Walk in Maidstone, Kent, where House of Fraser is one of the biggest tenants.
M&G said the suspension would give it time to raise cash to repay investors. While the fund is suspended, M&G will cut the fees it charges to manage the fund. M&G did not give a timeline for when the fund would be reopened, saying it was monitoring the situation daily.
The financial adviser Chase de Vere told investors not to panic, but added: “M&G has struggled with this due to number of investors cashing out and a relatively high exposure to retail properties, which are proving difficult to sell.
“As a result, the amount of cash in the fund has fallen to about 5%, making it difficult for them to meet ongoing redemptions.”
The fund’s performance has been weak for several years. Currently, it is showing a loss of 7.8% for investors over the past year.
The suspension of the M&G fund is the latest setback for the investment industry after the closure of the Woodford funds, and will increase calls for stiffer regulation of funds in illiquid securities.
M&G shares were down by nearly 2% after the suspension was announced.