M&G has extended the ban on investors withdrawing funds from its flagship £2.5bn property fund, one of the biggest in the country.
The company shocked small investors in December by suspending its giant Property Portfolio fund in response to a surge in the numbers of people pulling their cash out.
M&G is required to review the status of the fund on a monthly basis, and in an update on Thursday it said: “M&G is to continue the temporary suspension of dealing in the M&G Property Portfolio and its feeder fund until further notice.”
This means investors may have to wait months to see their cash again.
The fund specialises in commercial property, and the fund managers have been selling off assets such as retail parks and offices in order to rebuild cash levels. They revealed they had raised £70m since the end of November, with a further £67m of cash in the pipeline.
The fund was suspended after “unusually high and sustained outflows” – demand from investors for their money back – prompted by “Brexit-related political uncertainty” and the retail downturn.
Nearly £1bn had been withdrawn by investors in the space of a year. 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 block further withdrawals.
The suspension caused alarm among investors as it came hard on the heels of the debacle at Neil Woodford’s investment funds.
In its update, M&G said it had recently completed the sale of Ravenside retail park in Edmonton, north London, for £51.4m. That represents only a small gain on the £48.2m it paid for the site in 2009.
It has also exchanged contracts on an office development in Kingston Road, Staines, Surrey, for £19m. Reports relating to M&G’s purchase of this site in 2015 suggest this represents a loss on the £20m-plus that the fund management group paid at that time.
In the update, M&G said the decision to continue the suspension had been taken “in the interests of protecting the fund’s investors”.
It added: “The immediate priority is to raise cash levels in a controlled manner. The fund managers and associated teams are working hard to increase the fund’s cash position … Once cash levels have been sufficiently restored, the fund’s authorised corporate director will reopen the fund for dealing.”
