M&G Blocks Withdrawals from One of its Major Property Funds

[AsleepInYorkshire]

https://www.thisismoney.co.uk/money/mar ... dford.html

M&G blocks withdrawals from one of its major property funds - in a move reminiscent of Neil Woodford
M&G said it needs to sell properties to raise enough money to meet withdrawal demands, and as this can take a long time to complete the fund will be suspended for up to six months.

Apparently Brexit has created a demand for withdrawals as investors worry about house prices falling.

AiY

[Alaric]

M&G said it needs to sell properties to raise enough money to meet withdrawal demands, and as this can take a long time to complete the fund will be suspended for up to six months.

I suppose it reinforces the point that the OEICs structure has defects when the underlying assets are illiquid.

[UncleEbenezer]

M&G said it needs to sell properties to raise enough money to meet withdrawal demands, and as this can take a long time to complete the fund will be suspended for up to six months.

I suppose it reinforces the point that the OEICs structure has defects when the underlying assets are illiquid.

Or more generally, that putting illiquid assets into any kind of wrapper is no guarantee of liquidity.

But it's all a matter of degree. Even cash breaks down in the worst circumstances.

[Dod101]

I guess anyone holding a property fund in an OEIC format will by now be aware of the risks of illiquidity, partly through Woodford but also because of the problems at the time of the Brexit vote. Anyway the fund appears to be aimed at institutions and not at individuals so I do not suppose it will have a big impact.

Dod

[toofast2live]

https://www.thisismoney.co.uk/money/markets/article-7249971/M-G-blocks-withdrawals-one-major-property-funds-reminiscent-Neil-Woodford.html

M&G blocks withdrawals from one of its major property funds - in a move reminiscent of Neil Woodford
M&G said it needs to sell properties to raise enough money to meet withdrawal demands, and as this can take a long time to complete the fund will be suspended for up to six months.

Apparently Brexit has created a demand for withdrawals as investors worry about house prices falling.

AiY

I think you are still asleep in Yorkshire. House prices may rise or fall but they would have no impact on this fund as it doesn’t invest in houses. It holds commercial property.

Best wake up and have a cup of Tetleys, no Yorkshire, tea.

[SalvorHardin]

Best wake up and have a cup of Tetleys, no Yorkshire, tea.

Definitely Yorkshire Tea (advert below)

https://www.youtube.com/watch?v=8cipMoGKXGE

More seriously, this is yet another example of why people should hold illiquid assets via investments trusts rather than open-ended funds. Managers like the open-ended fund structure because it lets them raise more capital (and thus more fees) fairly easily. But if a lot of investors run for the exit at the same time, if they can't find a buyer they have to stop redemptions and/or engage in a fire sale. As we're currently seeing with Neil Woodford's funds.

It can be particularly bad for property funds because property isn't a liquid asset (though smaller company shares can also be quite illiquid if you're selling a lot). In theory you can probably find a buyer within a few days (e.g. a vulture fund) if you're prepared to take a devastating drop in price. The problem is that once the market realises that there's an element of forced selling in play, the managers will find it hard to get market value for the fund's properties.

It's like banks which borrow short-term money but lend long-term. Once confidence starts to go and more people start to ask for their deposits back it can quickly turn into a run.

[EssDeeAitch]

Best wake up and have a cup of Tetleys, no Yorkshire, tea.

Definitely Yorkshire Tea (advert below)

https://www.youtube.com/watch?v=8cipMoGKXGE

More seriously, this is yet another example of why people should hold illiquid assets via investments trusts rather than open-ended funds. Managers like the open-ended fund structure because it lets them raise more capital (and thus more fees) fairly easily. But if a lot of investors run for the exit at the same time, if they can't find a buyer they have to stop redemptions and/or engage in a fire sale. As we're currently seeing with Neil Woodford's funds.

It can be particularly bad for property funds because property isn't a liquid asset (though smaller company shares can also be quite illiquid if you're selling a lot). In theory you can probably find a buyer within a few days (e.g. a vulture fund) if you're prepared to take a devastating drop in price. The problem is that once the market realises that there's an element of forced selling in play, the managers will find it hard to get market value for the fund's properties.

It's like banks which borrow short-term money but lend long-term. Once confidence starts to go and more people start to ask for their deposits back it can quickly turn into a run.

I have two property IT's and one property fund and as there is nothing that defines the fund, Fidelity Global Property, as a "must have", I am going to sell just to be on the safe side. What's the old saying? If your going to panic, panic early!

[Quint]

I guess anyone holding a property fund in an OEIC format will by now be aware of the risks of illiquidity, partly through Woodford but also because of the problems at the time of the Brexit vote. Anyway the fund appears to be aimed at institutions and not at individuals so I do not suppose it will have a big impact.

Dod

Indeed Dod, I got nailed with the M&G property feeder portfolio in 2016. Got out when it re opened without too much damage. Lesson learned, I am now older and wiser.

[AsleepInYorkshire]

https://www.thisismoney.co.uk/money/markets/article-7249971/M-G-blocks-withdrawals-one-major-property-funds-reminiscent-Neil-Woodford.html

M&G blocks withdrawals from one of its major property funds - in a move reminiscent of Neil Woodford
M&G said it needs to sell properties to raise enough money to meet withdrawal demands, and as this can take a long time to complete the fund will be suspended for up to six months.

Apparently Brexit has created a demand for withdrawals as investors worry about house prices falling.

AiY

I think you are still asleep in Yorkshire. House prices may rise or fall but they would have no impact on this fund as it doesn’t invest in houses. It holds commercial property.

Best wake up and have a cup of Tetleys, no Yorkshire, tea.

I'm going

https://www.bbc.co.uk/news/uk-england-y ... e-49005038

AiY

[richfool]

https://www.thisismoney.co.uk/money/markets/article-7249971/M-G-blocks-withdrawals-one-major-property-funds-reminiscent-Neil-Woodford.html

M&G blocks withdrawals from one of its major property funds - in a move reminiscent of Neil Woodford
M&G said it needs to sell properties to raise enough money to meet withdrawal demands, and as this can take a long time to complete the fund will be suspended for up to six months.

Apparently Brexit has created a demand for withdrawals as investors worry about house prices falling.

AiY

I think you are still asleep in Yorkshire. House prices may rise or fall but they would have no impact on this fund as it doesn’t invest in houses. It holds commercial property.

Best wake up and have a cup of Tetleys, no Yorkshire, tea.

I'm going

https://www.bbc.co.uk/news/uk-england-y ... e-49005038
AiY

(Yorkshire tea is quite strong.)

But is there any direct or indirect correlation between domestic property and commercial property? Human nature being what it is, surely there will be some people/investors who may worry that one may influence the other.

As a separate point, there must be concern that the fall off in high street retail is affecting the demand for commercial property.
One of my REIT holdings (WHR) focuses on warehousing, which I view as capitalising on internet sales and distribution and thus is hopefully either not affected or is less affected than High Street retail property.

[colin]

is there any direct or indirect correlation between domestic property and commercial property? Human nature being what it is, surely there will be some people/investors who may worry that one may influence the other.

As a separate point, there must be concern that the fall off in high street retail is affecting the demand for commercial property.
One of my REIT holdings (WHR) focuses on warehousing, which I view as capitalising on internet sales and distribution and thus is hopefully either not affected or is less affected than High Street retail property.

The way I see it is that there is a correlation between falls in the pound and commercial property prices. Individual units of commercial property are expensive enough that demand or the lack of from foreign investors affects the value of the pound against other currencies. I they want to buy our property they have to exchange their currency for GBP, when they sell they will most likely sell their GBP proceeds as well. This activity is guided by their expectations of economic growth, so no I don't see a direct correlation between commercial and residential property except for London where foreign investors have been buying.

[AsleepInYorkshire]

I think you are still asleep in Yorkshire. House prices may rise or fall but they would have no impact on this fund as it doesn’t invest in houses. It holds commercial property.

Best wake up and have a cup of Tetleys, no Yorkshire, tea.

I'm going

https://www.bbc.co.uk/news/uk-england-y ... e-49005038
AiY

(Yorkshire tea is quite strong.)

But is there any direct or indirect correlation between domestic property and commercial property? Human nature being what it is, surely there will be some people/investors who may worry that one may influence the other.

As a separate point, there must be concern that the fall off in high street retail is affecting the demand for commercial property.
One of my REIT holdings (WHR) focuses on warehousing, which I view as capitalising on internet sales and distribution and thus is hopefully either not affected or is less affected than High Street retail property.

Firstly yes my comment about housing was incorrect. I think it was late at night when I posted, but I am also nursing some tummy pains (endoscopy on Friday) which have been dragging on for about a year now, and I am struggling at times to concentrate.

But look trivia aside I think the point you make is interesting. I drive down the M18 every now and again. There's quite a bit of "commercial" (storage) facility that isn't being leased currently. Clearly the high street is in a bit of a mucking fuddle. I wonder if one reason for this is the "shelf stackers" aren't able to empty their shelves. I think the high street can compete with the internet. But if all "I" am getting when I walk through a retail doors is shelves stacked in hope then I may as well use the internet.

I hasten to add Yorkshire Tea is one of the best available if you like decaf

AiY Tea

[scotia]

I'm going
https://www.bbc.co.uk/news/uk-england-y ... e-49005038
AiY

My first fear on opening the link was that it was about the falling commercial building market - and Bettys was about to disappear. Fortunately it wasn't. Yes - its good to see Bettys is still going strong, although its a few years since I lasted visited it. Maybe its time I should get Yorkshire back on my to-do list.