Investors have withdrawn £1.8bn from UK direct property funds over the past 13 months, with the now suspended M&G Property Portfolio accounting for £1.33bn of this total.
Data from the Investment Association out today (December 5) and covering the period to the end of October, showed investors have withdrawn cash from the IA UK Property Direct sector every month since September 2018.
Separate data from Morningstar for the same time period showed net outflows from the M&G Property Portfolio fund amounted to £1.33bn, equating to 73.8 per cent of the sector's total.
Over the past 13 months, when the outflows were happening, the fund lost 7.8 per cent, while the sector average return was 0.5 per cent.
The fund is the absolute worst performer in the sector over the past three years, returning 1.6 per cent compared with 13 per cent for the sector.
Laura Suter, personal finance analyst at AJ Bell, said: “With the closure of the M&G property fund yesterday, all eyes will be on the outflows from the sector.
"October saw the 13th consecutive month of outflows, with investors selling £148m of property funds. Over that time the sector has seen £1.8bn of outflows, as people have yanked their money out amid fears about the Brexit impact on property prices and the liquidity of the funds.
"The M&G closure shouldn’t be a reason for panic selling across the sector, but instead it’s a good time for investors to check the cash levels in their funds, assess the liquidity in those portfolios and ensure they are comfortable with the holdings.”
Open-ended funds that invest in property tend to retain substantial allocations to cash as a way to meet day-to-day redemption requests from investors without having to sell property.
The level of cash in the M&G Property Portfolio fell from 10 per cent to 5 per cent between July and its suspension on December 5, according to data from FE Analytics.
Open-ended property funds charge investors the full management fee for holding the cash.
FTAdviser reported this morning that the Bank of England and the Financial Conduct Authority have promised to act within weeks on the issue of illiquid assets being held within daily dealing funds.
david.thorpe@ft.com
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