M&G becomes latest UK firm to suspend RE fund trading

M&G Investments, the investment arm of UK pension fund Prudential, becomes the third firm in two days to suspend real estate fund trading following Standard Life and Aviva. 

M&G Investments, the investment arm of pension fund Prudential, has become the third UK firm in two days to suspend trading in one of its real estate vehicles. 

The firm cited a marked increase in “investor redemptions” in the fund, M&G Property Portfolio, since the outcome of the European Union referendum.

A spokesman for the firm said redemptions have now reached a point where M&G believes it can best protect the interests of the funds’ shareholders by seeking a temporary suspension in trading.

He said: “This will allow the fund manager time to raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values.”

Through the fund, M&G has invested in 178 UK commercial properties across the retail, industrial and office sectors on behalf of UK retail investors.

The move comes just hours after Standard Life Investments (SLI), the asset management arm of Edinburgh-based insurer Standard Life, decided to suspend trading on its £2.9 billion ($3.8 million; €3.4 billion) UK-focused real estate fund on Monday (July 4).

Then today, London-based Aviva Investors, the asset management business of UK insurer Aviva, became the second firm to suspend trading in a UK property fund since the Brexit vote. The firm blamed “extraordinary market circumstances” which are impacting the wider industry and have resulted in a lack of immediate liquidity in the £1.8 billion Aviva Investors Property Trust.

The decisions by both SLI and Aviva Investors came after a rapid increase in redemption requests by investors.

Laith Khalaf, an analyst at Bristol-based financial services firm Hargreaves Lansdown, said today’s developments could just be the beginning.

“The dominos are starting to fall in the UK commercial property market,” he said. “As yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It's probably only a matter of time before we see other funds follow suit.”

The fund suspensions have triggered significant drops in property-related shares today. Housing firms Taylor Wimpey, Persimmon, Barratt Developments and Berkeley Homes have all fallen by between 6 percent and 8 percent on the FTSE 100.

Aviva shares today dropped by almost 3 percent, while SLI fell by 4.5 percent.