£2.8bn Taken Out Of Property Funds In UK In Past Year

UK property funds have taken a massive hit over the past 12 months as many investors have sold up. The two main reasons for this are underperforming UK high streets and Brexit worries. This news was announced in the week ending 6 December, following news that the M&G property fund was suspended following withdrawals of around £1.5bn since the start of 2019 alone.

Underperforming Commercial Property Funds: UK

The data on withdrawals from UK commercial property funds indicated that the total of almost £3bn was taken out of 15 funds, with news that the largest fund, M&G, would be suspended during the week commencing 2 December.

The Aberdeen UK Property Fund took the second biggest withdrawal hit, totalling £773mn.

The main reason the M&G fund was so badly affected was down to its high exposure to the retail property sector. The fund totalled £2.5bn, and 37% of assets are in retail. It remains to be seen whether Aberdeen UK will take steps to suspend trading, as their commercial retail exposure amounts to 43%.

Withdrawals Paused

Thousands of M&G investors have been banned from withdrawing the cash invested in the troubled Property Portfolio, and although the fund is suspended all investors will continue to be billed for the majority of their management fees.

The reason M&G suspended trading in the portfolio was due to the fact they could not dispose of their properties fast enough to meet the cash demands of all investors. The fund was also suspended for a few months in 2016 following the Brexit referendum.

Suspending trading in the Property Portfolio enables M&G to seek best prices for retail properties, rather than rushing to market at rock bottom sales prices. M&G says they will continue active management of this fund and have offered investors a discount of 30% on annual fees.

Many investors hold ISA and pension cash pots in funds like M&G, and it’s likely other providers will follow suit by suspending withdrawals until the financial situation stabilises.

It’s estimated that property funds have seen total cash withdrawals of around £5bn this year. And, this follows on from the rush for cash withdrawals from property investment funds following the decision to exit the European Union.