Early last month the £2.5 billion M&G Property Portfolio Fund was forced to stop investors from taking cash withdrawals from the fund.
This is an open-ended fund where sales of units by investors can result in the manager being forced to sell some investments to realise cash to meet those redemptions. The fund had seen withdrawals of over £1 billion in the last year and recently experienced “unusually high and sustained outflows.” It was therefore forced to stop investors from taking cash out of the fund. Other open-ended property funds may be forced into similar action.
Is this another Woodford Equity Income Fund situation where investors are going to be locked in for many months and unable to sell their holdings and ultimately lead to a wind-up or substantial write-down of their investments? The simple answer is, quite possibly, but unfortunately there is little investors can do about it.
The Clarion Portfolio Funds and Model Portfolios do not have, nor have they ever had, any exposure to the M&G Property Fund, or any other similar property funds. This is because of the problems which could result from the lack of liquidity, and therefore opportunity cost, at times of high redemption requests by investors.
As also confirmed by previous articles neither did Clarion nor any of our clients have any exposure to any of the Woodford Funds.
Please click here for an article in which we take a broader look at property and its importance to the global economy.
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