M&G Investments is to close its flagship UK open-ended property fund for retail investors after 18 years.
M&G has suspended trading in the vehicle which owns £565m (€651m) in UK property assets.
The M&G Property Portfolio, which was established in 2005, is being wound up due to “declining interest” from retail investors for open-ended, daily-dealing property funds.
In recent years, open-ended, daily-dealing property funds for retail investors have experienced a number of periods when trading in the funds have been ‘gated’, when redemptions have been too high – including after the Brexit vote and during COVID-19.
M&G said the funds were “once a popular type of vehicle for UK retail investors to access real estate”, but the sector had experienced persistent outflows over several years.
As the fund has decreased in size, it has reduced M&G’s “long-term ability to maintain a diversified portfolio without incurring high, ongoing transaction costs required to configure the portfolio – particularly against a backdrop of continued and potentially accelerating outflows”, the firm said.
Once given regulatory approval, M&G wil begin selling assets “with the objective of ensuring that fair market prices are achieved”.
M&G expects it will take approximately 18 months for the majority of the portfolio to be sold and money returned to investors. M&G has therefore reduced its 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 and 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.”
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