UK property funds seek to reassure investors after M&G suspension

M&G said it would shutter its £2.5bn open-ended property fund following "unusually high and sustained outflows", which data from Morningstar estimates at £950m in the year to 30 November.

It also blamed "Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector" for the move. Its AUM has declined by more than a quarter since the start of the year, from £3.5bn, data from FE Fundinfo shows.

The episode has sparked fears of a knock-on effect similar to that seen after the Brexit referendum in 2016, which saw a number of property funds gate.

However, asset managers that run some of the largest bricks and mortar mandates have said they are unlikely to follow suit.

A spokesperson for Aberdeen Standard Investments said its two funds, SLI UK Real Estate and Aberdeen UK Property, hold cash buffers of 15.7% and 12.7% respectively.

"The intention is to maintain this risk-off stance until we have greater clarity on the outlook for the UK economy in the context of Brexit and the upcoming general election," the spokesperson said.

"We will continue to monitor the situation closely and in particular any impact M&G's decision has on investor sentiment towards the sector. Our prime focus as always is to act in the best interests of investors."

A spokesperson for Columbia Threadneedle said similar, noting cash levels in its Threadneedle UK Property Authorised Investment Fund (PAIF) "are maintained within a liquidity corridor of 5%-15% and year to date we have comfortably met all client redemption requests".

They continued: "Furthermore, there have been a number of days more recently whereby we have witnessed net investor inflows.

"All property funds are managed differently and we continue to monitor client and market sentiment with a view to ensuring good customer outcomes."

'Targeted sales programme'

Aviva said it had "pro-actively built cash levels" in its Aviva Investors Property fund. It explained it had embarked upon a "targeted sales programme over the summer" that had raised cash levels to around 30%.

"We are in a period of heightened market uncertainty and believe this is an appropriate level given market conditions. Robust liquidity management remains a key priority for the fund managers," said the spokesperson.

The BMO UK Property fund was one of those that were not forced to suspend in the wake of the 2016 referendum, which it said was "down to the stable nature of its investor base".

It said the fund did move to ‘bid' pricing in August 2019, which it explained "brought the fund in line with its peer group who moved to bid last year". Fund manager Guy Glover said this move "reflects a cautious, considered approach, which ensures long-term investors are protected".

Cash levels in the BMO fund are at around 24%. Glover said the fund "currently has a stable and diverse investor base seeking long-term exposure to UK property".

"We keep in close contact with our investors who understand that the fund provides a diverse exposure to UK property, importantly with a low retail weighting, and offers a stable long-term income stream. The fund remains well positioned due to this differentiated approach.

"Cash levels are above our longer-term target and we are actively, but carefully, pursuing acquisitions to match the quality of the existing portfolio."

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