The M&G Property Portfolio will remain shuttered for another month after cash levels in the fund barely inched higher in January despite it selling down another four assets.
In the latest update, the fund’s ACD said it had decided, with the agreement of the depositary, it “can best protect the interests of all its investors by continuing the suspension in dealing in its shares”. The £2bn fund has now been frozen since 4 December 2019.
The decision comes after the fund was only able to raise its cash level to 21.3% from 21% at the last update on 19 January. Manager Justin Upton (pictured) was able to free up an additional £47.7m from the sale of four assets in January.
A further £306.3m of asset sales are currently under offer or have exchanged with a number moving towards completion.
ACD ‘actively’ considering re-opening date
However the fund’s ACD struck a more hopeful tone in the latest update, stating it was “actively giving further consideration to an appropriate date for resumption of trading”.
“Whilst completion of all ongoing transactions cannot be certain, in expectation of the fund’s cash position increasing to a sufficient level, we are actively giving further consideration to an appropriate date for resumption of dealing,” it said.
“When the fund’s ACD and depositary are satisfied we have a suitable liquidity position for investors who choose to remain and those who wish to redeem, we will write to all investors giving notice ahead of reopening the fund.”
Cash levels could need to be north of 30%
Fairview Investing consultant Ben Yearsley said the fund will likely need to have cash levels “north of 30%” before it reopens.
“The problem they have is their fund will probably see larger outflows than others that have reopened as it’s been closed for longer and investors are probably more frustrated,” said Yearsley.
M&G said in its January update that it would target a long term cash weighting of circa 20% to enhance liquidity management, despite the fund’s history of running a relatively low cash range between 7.5% and 12.5%, to avoid diluting returns and maximising exposure to the asset class.
See also: M&G Property Porfolio remains shut despite exceeding 20% cash
It is not charging fees on cash held in excess of 20% while the fund is suspended and will continue to waive 30% of the fund’s annual charge.
Alongside the M&G Property Portfolio the Aegon Property Income fund and Aviva Investors UK Property fund also remain shut.
All the major property funds were forced to gate last year after the Royal Institute of Chartered Surveyors introduced material uncertainty clauses on their independent valuations due to the coronavirus pandemic which have since been lifted.
The Threadneedle UK Property Paif was one of the first to resume trading back in September, followed by the L&G UK Property fund which reopened in October. Both have been hit by redemptions upon re-opening.
Janus Henderson is set to re-open its UK Property Paif later this month after increasing its cash position to 27.1%.
See also: M&G property fund suspension looks set to drag on as unfrozen rivals hammered by outflows
