Increased market volatility and uncertainty has created an environment in which investors have become more nervous about investing in the UK commercial property market and valuations of underlying properties has been more difficult.
Unlike investing in equities, investing in commercial property is less liquid as transactions take a long time to complete. Equally, the fund managers want to ensure they get the best deal possible for their investors and do not want to participate in a ‘fire sale’ whereby they sell properties below their fair value in order to meet redemptions.
In December 2019 the M&G feeder of Property Portfolio fund was unable to meet the demands of withdrawals and suspended. More funds were suspended in March 2020 because they were unable to value the properties within the funds due to the Coronavirus (COVID-19) pandemic.
Fund managers do all they can to avoid suspending trading in their fund, but unusual and exceptional circumstances can mean this happens at times. The suspension allows for an orderly valuation and sale of properties to help ensure that the strong attributes of the portfolio in terms of its mix of properties and quality tenant base are not compromised while the cash buffer can be increased ahead of re-opening the fund.
Your investment portfolio should be considered over the medium to long term. If you don’t need to make withdrawals then no action is required. But should you need to, contact your financial adviser to check all your options. Please, bear in mind that no withdrawals can be currently taken from these funds.