The M&G fund suspension is sending shock waves through the commercial property investment market.
Following the block on investors withdrawing from the fund, financial giant Prudential gated the £164 million M&G Property Portfolio.
“We have been lowering UK property exposure broadly across the range since the beginning of 2019,” said a spokesman.
“We had a change of strategic approach early in 2019 where we reduced our charges as well as changing the fund’s objectives. This required us to sell property to ensure the fund was in line with the client’s expectations.”
Now, Aberdeen Standard Investments (ASI) is considering a strategy reshuffle of the £1.4 billion invested in UK retail and commercial property to see if a shift from shops and stores to a more diversified asset base would benefit customers.
Change of tack
More than 40% of the Aberdeen UK fund is staked against the fortunes of retail.
The fund looks ready for a change of tack as Neil slater, former head of the fund’s Japanese business took the helm six weeks ago. ASI has £43 billion in assets around the world.
Meanwhile, the M&G Property Fund is still running day-to-day but investors cannot withdraw their money until later this month – providing a 28-day trading review is passed.
Investors have taken £1.1 billion from the fund over the past year, with managers blaming Brexit uncertainty and struggling retailers closing stores or trying to renegotiate cheaper rents as the reason for the run.
L&G’s £650 war chest
In July 2016, withdrawals from the same property fund were suspended for four months after a flood of outgoings from property funds soon after the Brexit referendum.
The problem is managers cannot sell properties fast enough at a good price to keep up with the demand for cash from investors.
The UK’s biggest property fund, the £3.2 billion Legal and General UK Property, admits holding between 20% and 25% of the fund value in cash to guard against a run of withdrawals by investors.
That would give the fund a war chest of around £650 million.
Although the reserves deplete cash available for investment, they give managers scope in settling withdrawal demands from investors without offloading properties at reduced values.