M&G kills off £565m Property fund

M&G said that it would close the funds due to, “declining interest in open-ended daily dealing property strategies from UK retail investors.”

The fund manager said the move was in the “best interests” of investors and is subject to regulatory approval.

M&G has suspended dealing in shares of the funds today pending closure and is writing to clients about the next steps.

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The fund, along with several other property funds run by competitors, was suspended in 2019 after a wave of redemptions hit the property fund sector.  M&G suspended the fund on 4 December 2019 and it remained suspended for 18 months. At the time the fund manager blamed Brexit-related uncertainty and ongoing structural shifts in the UK retail sector.

The fund has £565m invested, about a quarter of the £2bn invested in the fund in 2019 when it was last frozen.

M&G said in a statement today: “Once a popular type of vehicle for UK retail investors to access real estate, the IA UK Direct Property sector has seen persistent outflows over several years.

“As the fund has continued to decrease in size, it has reduced the manager’s long-term ability to maintain a diversified portfolio without incurring high, on-going transaction costs required to configure the portfolio – particularly against a backdrop of continued and potentially accelerating outflows.”

Once regulatory approval is granted the fund will begin selling off assets, a process it believes will take 18 months to complete. All proceeds will be returned to investors minus charges but M&G said that in recognition of the closure, M&G has reduced the Annual Charge by 30% as of today and abolished it entirely on cash. Income distributions will continue to be paid as normal.

Neal Brooks, M&G’s global head of product & distribution, said: “When we launched this strategy in 2005, we – alongside our peers – provided access to an asset class which had historically been unavailable to long term savers in a pooled structure. The market has since evolved.

“Declining retail investor interest across the sector for this fund structure, alongside uncertainty around their future composition is posing challenges to the future viability of funds like the M&G Property Portfolio – particularly for those investors who require daily liquidity. We considered various options, but believe this is the right decision for our investors.”

Dealing in the funds was suspended at 12 noon today (Thursday 19 October 2023). Instructions to buy, sell or switch in or out of shares/units in the funds will no longer be accepted, M&G said.

• Advisers can contact the the Financial Adviser Helpline team on 0800 328 3191 from 8am to 6 pm, Monday to Friday.

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