The M&G Property Portfolio held by many of our clients entered a temporary suspension of trading on the 5th July due to uncertainty in the market. Since its suspension, our investment team has been monitoring the Commercial property market within the wider macroeconomic context and we have received regular updates on the progress of the fund in bringing about the resumption of trading. We recently received an update from M&G CEO William Nott that the fund is now due to resume trading at midday on Friday 4th November. This comes as the market has begun to stabilise, allowing valuations to revert to a monthly basis as before the suspension.
The fund was temporarily suspended after high levels of uncertainty in the UK Commercial Property market resulted in a high level of investor redemptions following the EU Referendum vote. Since the suspension, Fund Manager Fiona Rowley has been working hard to increase cash levels in the fund by selling a number of properties in a controlled and strategic manner. In total, 58 properties have been sold at a discount of only 3.5% compared to pre-referendum prices. The cash position is now sufficient enough to meet expected levels of redemptions. In the short to medium term, Fiona has highlighted that the fund will maintain a high (15%+ cash position) as a precautionary measure while Brexit negotiations unfold.
In terms of market outlook, the UK Commercial property market remains resilient. The market has benefited from weaker sterling which has encouraged overseas buyers to enter the market. Additionally, many of the fundamentals that underpin the property market remain reasonably solid. In comparison to other periods of uncertainty in the property market, demand is strong and equity rather than debt financing has played a more important role in property purchases in recent years. Property values appear to be stabilising, however it is important to bear in mind that there could be periods of weakness going forward when Brexit negotiations commence.
Our investment team continues to conduct in-depth analysis on the fund and monitors the market on a regular basis. It is our view that the M&G Property Portfolio is well managed, well positioned within the UK Commercial Property market, and provides a good source of income for our portfolios. For these reasons, the fund will continue to feature in our discretionary portfolios going forward.
Risk warnings: Opinions constitute our judgement as of this date and are subject to change without warning. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your initial investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.