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M&G moves to stop exit from property fund

M&G has moved to deter clients from exiting its £360m Guernsey-based property fund by temporarily cutting the value of its units after its liquidity levels dwindled.

The group has switched from “creation” to “cancellation” pricing on the fund, reducing the value of investors’ units by 5.5 per cent to encourage them to remain invested.

On a property fund, the creation price reflects how much it would cost to buy the fund’s portfolio of investments, including dealing costs and stamp duty, but the cancellation price simply reflects the portfolio’s value. The move comes after “persistent” investor outflows have left the fund – managed by Dermot Kiernon – struggling to maintain sufficient levels of cash to allow it to honour outflow requests.

Most UK funds that buy properties directly made similar pricing switches nearly three years ago when the property market crashed, with some remaining in place for as long as 18 months.

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Comments

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  1. Helga Posslethwaite 9th September 2010 at 5:15 pm

    This article is unfair, factually incorrect and unfortunately displays a lack of basic understanding of how pricing of these funds works. These switches are not to discourage or deter outflows. I am aware that the fund has plenty of cash and is not “struggling” at all. Indeed many other funds I monitor have been switching around their prices all year. Thank heavens M&G don’t manage their property funds in such a manner!
    I expected better reporting from Money Marketing.

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