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M&G suspends $3.2 billion UK property fund as Brexit takes toll

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By Reuters
M&G suspends $3.2 billion UK property fund as Brexit takes toll
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(Reuters) – British fund firm M&G Investments <MNG.L> has suspended dealing in its flagship open-ended UK property fund, blaming Brexit uncertainty for a surge in investor requests to cash out.

Unusually high and sustained outflows from the 2.5 billion pound ($3.21 billion) M&G Property Portfolio have coincided with a period of continued Brexit-related political uncertainty, M&G Investments said on Wednesday.

The fund firm also said ongoing structural shifts in Britain’s retail sector had made it difficult for it to sell some of its largest assets.

“Given these circumstances, we have now reached a point where M&G believes it will best protect the interests of the Funds’ customers by applying a temporary suspension in dealing,” it said.

The funds will continue to be actively managed in suspension, M&G said, adding it would waive 30% of its annual charge until dealing resumes.

The temporary suspension will allow the fund managers time to raise cash levels to pay redemptions, whilst ensuring that asset sales are achieved at market prices and investors in the fund are safeguarded, M&G said.

Britain’s top property investment funds have shed almost 10% of their combined assets this year as investors fret about the impact of Britain’s exit from the European Union.

Fund industry tracker Morningstar showed each of the 10 biggest open-ended property funds shed assets between January and August this year as investors pulled cash from the sector.

The M&G Property Portfolio fund was the worst hit, with net outflows of more than 750 million pounds ($962.25 million).

Other funds that saw significant outflows at that time included Aberdeen UK Property and Janus Henderson UK Property.

News of the suspension comes one month after Britain’s Financial Conduct Authority said asset managers had “a central duty” to ensure effective liquidity management of their funds.

Commenting on the fund suspension, the FCA said it was working with M&G, the fund’s authorised corporate director and the fund’s depositary “to ensure that that timely actions are undertaken in the best interests of all the fund’s investors.”

The FCA has opened an investigation into the suspension in June of the now-closed equity fund run by Neil Woodford, one of Britain’s highest-profile asset managers.

(Reporting by Noor Zainab Hussain in Bengaluru; additional reporting by Carolyn Cohn and Huw Jones, Editing by Shounak Dasgupta and Sinead Cruise)