M&G extends suspension of its flagship £2.5 billion fund until further notice

M&G extends suspension of its flagship £2.5 billion fund until further notice
  • M&G announces that the flagship £2.5 billion fund will remain suspended until further notice.
  • M&G Securities' authorized corporate director (ACD) extended the suspension to protect investors.
  • The firm raised £137 million before the fund was suspended in early December.
  • Ryan Hughes of AJ Bell says the firm will have to sell an estimated £500 million worth of property to create a new cash buffer.
  • The firm expressed confidence that the fund will be reopened once sufficient cash level is achieved.
  • M&G announced that Ravenside retail park’s sale has been finalized at £51.4 million.

In an announcement on Friday, a leading name in the UK’s investment managers, M&G declared to its investors that the suspension of the firm’s property portfolio, as well as the feeder fund, is likely to be stretched until further notice.  

December 4th, 2019 marked the first time that the funds were originally suspended. Ahead of the suspension, the firm saw sustained, unusually high outflows that according to its representatives, could be attributed to the rise in political uncertainty driven from the UK’s imminent departure from the European Union. The representatives had also added that the recent structural changes in the United Kingdom’s retail sector may also have been a contributing factor.

M&G Securities’ Authorized Corporate Director Took The Decision To Protect The Investors

As per the announcement, M&G Securities’ authorized corporate director (ACD) took the decision of stretching the suspension further in order to ensure protection for the investors of the fund.

According to M&G, the firm had raised a massive £137 million before the fund was suspended in early December. The amount helped a great deal to improve the fund’s cash position. It was also highlighted that the firm has already completed or exchanged £70.4 million of the raised funds while the remaining £67.2 million are either in solicitors’ hands or under offer as of now.

Ryan Hughes had commented in December following the fund’s suspension that in order for M&G to achieve its target of raising an all-new cash buffer, the firm will have to rely on selling a significant chunk of property. Hughes who heads AJ Bell’s active portfolios also estimated £500 million worth of property to be sold for the firm to establish a new cash buffer. At £137 million, M&G has raised one-third of this amount so far.

M&G Says Fund Will Be Re-opened For Dealing Once Sufficient Cash Level Is Achieved

The firm also cleared its stance to the investors that the fund’s suspension is a strategy directed at restoring sufficient cash levels for M&G. Once it is achieved, the fund will be re-opened for dealing, on the direction of the ACD.

M&G’s flagship property fund is valued at £2.5 billion making it one of the largest in the UK. For as long as the suspension continues, however, investors will remain disabled from withdrawing funds.

At £1 billion withdrawal within a year from the flagship fund, the firm accepted its defeat in catching up the pace in selling the commercial property to cater to the investors’ requirements. In a recent update, however, M&G announced that Ravenside retail pair’s sale has been finalized at £51.4 million. The company had invested marginally lower £48.2 million in Edmonton’s site in 2009.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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