Ryan Hughes, head of active portfolios at AJ Bell, comments on the announcement to reopen the M&G Property Portfolio fund in May.
“News that the M&G Property fund will finally resume dealing after nearly 18 months suspended will no doubt be welcomed by the many investors who have been unable to access their money for such a long period. With the fund at around £2bn, many investors have been stuck in limbo for too long as many of the underlying properties were sold to raise liquidity to reach this point.
“The announcement from M&G also contains further changes to the fund including moving to a full spread basis to ensure that buyers of the fund pay the dealing costs of transacting in commercial property and allowing the actual property exposure to fall as low as 60% in exceptional circumstances. While M&G have announced they won’t charge their annual management charge on cash above 20% until the end of the year, it will resume after that point. It still seems an anomaly that property funds deem it suitable to charge the full annual management fee when 20% of the fund will simply be held in cash.
“While this reopening is welcome, we shouldn’t forget that the outcome of the FCAs consultation into the appropriateness of property in an open ended structure is still outstanding. The consultation closed in November 2020 but as yet no findings and rule changes have been announced, although the key element of the consultation was the potential need to give up to 90 days’ notice to redeem your investment. This will have major implications for investors should this change be confirmed but ultimately would likely stop the huge liquidity mismatch risk that got not just M&G but the whole open ended property sector into this mess in the first place.”