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M&G halts trading, blaming Brexit and retail sector turbulence

By Hazel Davis

As leading commercial property fund halts trading, there are fears other funds will follow suit

One of the UK’s biggest property funds has halted trading, blaming Brexit and a shifting retail sector.

M&G – which owns various shopping centres across the UK – has banned withdrawals on its £2.5bn fund citing “unusually high and sustained outflows” as well as political uncertainty.

Nearly £1bn has been withdrawn by investors from the fund over the last year. In a letter to investors M&G said that it would waive 30 per cent of its annual charge, which will end when the funds resume dealing, and monitor the situation daily.

There is concern among experts that this could create a domino effect. Patrick Connolly, chartered financial planner at Chase de Vere, says: “Commercial property investments have been under pressure since the EU referendum result of 2016 and since that time, most property fund managers have been paying close attention to the liquidity of their funds to make sure they are able to meet any redemptions.”

However, he adds, “M&G has struggled with this due to number of investors cashing out and a relatively high exposure to retail properties, which are proving difficult to sell. As a result, the amount of cash in the fund has fallen to about five per cent, making it difficult for them to meet ongoing redemptions.”

But Connolly urges investors not to panic: “Property still remains an asset class which can play an important role in investment portfolios and, when we have some real clarity on Brexit, the prospects for this asset class will hopefully improve.”

FURTHER READING: UK retail sales slow down, raising fears for economic outlook

FURTHER READING: UK stores see a 10 per cent drop in visitor numbers over seven years

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