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Please see the article below published by A.J. Bell last week (14/07/2020) and received yesterday, which provides an update on the status of the M&G Property Portfolio fund:

Investors in the M&G Property Portfolio will have to wait at least another month before they can get their hands on their money, with the fund’s suspension extended for another 28 days. Investors have endured more than seven months of suspension so far and it now feels likely that the extension could continue until the end of the year.

This update provides a small glimmer of hope, as the independent valuers on the fund say they have clarity over pricing in another two areas of the property market: central London offices and student accommodation. Along with industrial and logistics properties, this means that they can accurately price 28% of the fund. However, that means more than 70% of the fund is still invested in assets where there is no certainty over their value – the fund has a long way to go before it gets below the FCA’s 20% threshold for uncertainty over valuations.

The majority of property fund investors are doing so partly for the income they’ll receive, but this has been very uncertain during the Covid-19 crisis, with many companies unable to pay rent or deferring it. The managers on the M&G fund say they are now getting 71% of their rent due, slightly up from two-thirds in April, meaning investors should expect a similar 30% haircut to their income payouts from the fund.

The M&G property fund is fighting fires on two sides before it can re-open: one on the accurate valuation of its assets and another on the level of liquidity in the fund. Investors will be disappointed that no properties have been offloaded since last month’s update and there are still £180m of assets either under offer or exchanged on. Considering over the past seven months of the fund closure there has been almost £150m of assets sold, there could be a long road to go before there is sufficient cash to re-open.

As you can see from the above, there is still a fair bit of uncertainty surrounding the M&G fund in terms of re-opening and its peers will be facing similar challenges.

Commercial Property investment still has a vital role to play in portfolios, as it remains a great investment diversifier.

It is important to remain patient and focus on your long-term investment goals.

Please continue to check our Blog content for the latest investment, markets and economic updates from leading investment houses.

Please keep safe and healthy.

Carl Mitchell – Dip PFS

IFA and Paraplanner

20/07/2020