M&G suspends property portfolio fund amid Brexit tension

"Since 2016 we have managed the fund to ensure that we continue to have a diverse portfolio of high quality properties for our investors and hold a higher level of cash in the face of continued political and market uncertainty".

The £2.5bn M&G Property Portfolio was suspended after "unusually high and sustained outflows" - demand from investors for their money back - prompted by "Brexit-related political uncertainty and ongoing structural shifts in the United Kingdom retail sector".

Jason Hollands, managing director, business development and communications at Tilney Investment Management Services said: "M&G has just announced the temporary suspension of the M&G Property Portfolio fund citing "unusually high and sustained outflows" coinciding with "Brexit-related political uncertainty".

Nearly £950m has been withdrawn from the main Property Portfolio fund since the start of the year, according to data provider Morningstar.

The platform expert said advisers who have advised clients to put a significant amount of money in a property fund are setting them up for a "big fall".

It said: "Brexit-related political uncertainty and ongoing structural shifts in the United Kingdom retail sector have made it hard for us to sell commercial property".

The same fund was suspended in July 2016 for four months following the UK's European Union referendum when money flooded out of such funds.

Investors range from armchair, retail investors to institutional investors, dealing with millions of pounds.

M&G said the decision to suspend was made by M&G Securities, the funds' authorised corporate director, in agreement with the fund's depositary and the FCA has been informed. This fund has not had problematic performance, but it is invested in an inherently illiquid asset class and therefore redemptions need to be dealt with through an orderly sale process. It is showing a loss of 7.8% for investors over the past year and is the second-worst performer of 15 funds in its sector over that period.

The news of its suspension comes five months after celebrity stock-picker Neil Woodford suspended his flagship fund after seeing a spike in outflows.

A spokesman for Janus Henderson, another asset manager, said: "We confirm that the Janus Henderson UK Property PAIF and Feeder fund remain open".

The M&G case will make the case stronger for regulators to take a tougher stance on these types of investments.

Investors have been pulling their money out of other large so-called open-ended property funds, and the FCA has recently introduced daily monitoring of property funds.

"However, M&G has struggled with this due to number of investors cashing out and a relatively high exposure to retail properties, which are proving hard to sell".

While the M&G fund is suspended, most other providers have far greater liquidity, and less exposure to retail properties, and so are better placed to meet redemptions, as long as there isn't a mad rush to the exit door.

"Property is a long-term investment and we urge investors not to panic".

The latest suspension reflects badly on the FCA, according to AJ Bell head of active portfolios Ryan Hughes.