M&G Property Portfolio Suspension on Investments

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Shadrach   in Alternatives

Last updated: 08 January 2020, 05:11 GMT


The suspension of buying or selling units has been suspended in the M&G Property Portfolio. 

Investors became concerned over the prospects for the UK property market when the UK's decision to leave the EU in 2016. As a result, investors were unable to buy or sell units in these funds because of heightened outflows from property funds and a number of suspended trading.

M&G has suspended its Property Portfolio fund that has a high level of exposure to this sector. These property funds subsequently resumed trading but Brexit uncertainty has continued. Most recently it has led to some uncertainty over the outlook for UK retailers and another uptick in redemption requests.

Property can’t be sold quickly unlike shares. In Order to easily give the investors their money back, most property fund managers kept some cash ready. 

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The level of cash in the fund can fall quickly if at a similar time many people choose to sell their units in a fund so the managers might then be forced to sell properties to raise more cash.

But if many people choose to sell their units in a fund at a similar time the level of cash in the fund can fall quickly. The managers might then be involuntarily sell properties to get more cash. 

Selling property can be expensive that is why this is not the best outcome for investors who want to stay invested in the fund. The manager might have to sell properties and accept a lower price to secure a faster sale rather than keeping it. The fund manager will suspend dealing in the fund inorder to avoid this. Giving the manager time to sell their property holdings to prevent more investors from selling. Even if it is temporary, investors can’t get access to their capital if they need it because the fund could be shut down for a few months.

The same thing happened recently as 2016,spreventing investors from selling is usually a last resort for property fund managers but it’s not entirely unusual, some funds did this during the 2008 financial crisis.

It can take many months before investors can sell and withdraw their capital if a fund is suspended, this should be a consideration for any investor who may need their money in the short term. Take note that these funds should only be considered as a long-term investment.