M&G Investments is reopening its £2.1bn property fund, 17 months after it was suspended.
The asset manager said the M&G Property Portfolio and its feeder fund, the Feeder of Property Portfolio, will reopen for dealing on 10 May.
In a statement, M&G said there is now ‘suitable liquidity’ for client withdrawals, as well for those who want to remain invested.
The fund had shut its doors in December 2019 after a surge in redemption requests hit the sector as investors took fright at the looming Brexit deadline.
Laurence Mumford, chair of the fund’s authorised corporate director, 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.’
While the fund was suspended, its manager, Justin Upton, sold 38 properties for £702m, reducing the total number of holdings to 54. The portfolio’s cash position now stands at 33.2%.
M&G, which reduced its fees by 30% during the suspension, said it is making several changes to the fund, including moving to a dual pricing model on a full-spread basis, and that it would bear the costs of implementation.
The firm will also continue to waive fees for cash above 20% until the end of 2021.
M&G had been under pressure to reopen the fund for some time as other open-ended bricks-and-mortar mandates, gated last March amid coronavirus uncertainty, started to reopen their doors earlier this year.
AJ Bell’s head of active portfolios, Ryan Hughes, said that although the reopening is welcome, ‘it still seems an anomaly that property funds deem it suitable to charge the full annual management fee when 20% of the fund will simply be held in cash’.
The news also comes as the results of a consultation in open-ended fund liquidity launched by the Financial Conduct Authority in August are still pending.
According to the paper, the City watchdog may require investors in open-ended property funds to wait up to 180 days to get their money as it is trying to address a fundamental ‘liquidity mismatch’ in the sector.
The plan seeks to fix a long-running reputational challenge for UK funds but would also pose a fundamental challenge to major operators, such as M&G and LGIM, making these strategies largely unsuitable for retail investors.
In today’s statement, M&G said that exposure to retail in the Property Portfolio has been reduced from 38.4% to 28.1%. The fund is now overweight to industrials, according to the firm, while assets in the office sector are focused on central business districts.
‘More than 90% of both rental income and service charges for 2020 has been collected and the fund has delivered an income distribution of 4.7%,’ it added.
In its latest accounts for the 12 months to September 2020, the fund reported a loss of around 11% as commercial property values were hit by the coronavirus. One of the co-managers, Fiona Rowley, also quit last June, leaving Upton as sole lead manager.
In the past year, the M&G mandate has lost 6.5% against a sector that was down 2.2%.
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