Increased market volatility and uncertainty regarding Brexit and the outlook of UK commercial property has created an environment in which investors have become more nervous about investing in the UK commercial property market. As a result, the M&G Feeder of Property Portfolio Fund as of 4 December 2019 has suspended trading

What happened?

There has been an increase in withdrawals from property funds across the sector as investors have become more nervous about the commercial property market. Up until now, the M&G Feeder of Property Portfolio Fund has been able to manage these withdrawals. However, as the outlook has become more uncertain withdrawals have increased and the Fund has been unable to meet these redemptions. To ensure that existing investors are protected and the fund managers can sell properties in a controlled manner, the Fund has suspended trading.

This means they have stopped accepting further investment into and Switching from/withdrawals out of the fund for the time being.

If you are a portfolio customer of Nationwide, you could have a proportion of your portfolio invested in this fund.

Property funds v equities

Whilst property funds are generally less risky than equities, they can go through periods of time when funds are less/not accessible.

Unlike equities – where you are investing in shares of that company – commercial property funds typically invest in buildings, warehouses or shopping centers and like house purchases, can take a significant length of time to be bought and sold.

Why suspend trading?

Increased market volatility and uncertainty regarding Brexit and the outlook of UK commercial property has created an environment in which investors have become more nervous about investing in the UK commercial property market.

Unlike investing in equities, investing in commercial property is less liquid as transactions take a long time to complete. Equally, the fund managers want to ensure they get the best deal possible for their investors and do not want to participate in a ‘fire sale’ whereby they sell properties below their fair value in order to meet redemptions.

Fund managers will do all they can to avoid suspending trading in their Fund, but unusual and exceptional circumstances can mean this happens at times. The suspension allows for an orderly sale of properties to help ensure that the strong attributes of the portfolio in terms of its mix of properties and quality tenant base are not compromised while the cash buffer can be increased ahead of re-opening the fund.

The suspensions will be reviewed on a regular basis and lifted when it is deemed prudent to do so.

What does this mean for my investments?

Deals placed after mid-day on the 4th December 2019, for the M&G Feeder of Property Portfolio will not be accepted and will be applied to the appropriate product cash facility. You can arrange for investment of these monies into any open fund via your Aegon Customer Dashboard – or get in contact with your Financial Planning Manager if you feel you need advice.

The fund will continue to be actively managed by the fund manager who will also continue to report on any investment activity as normal. M&G have confirmed that "in recognition of customers' temporary inability to access their investment", they will be waiving 30% of its annual charge, which will end when the fund resumes dealing.

Depending on your levels of trading online through your Aegon Customer Dashboard, and your attitude to risk, your money held within a property fund should represent only a small proportion of your overall investment portfolio, which could also include; government bonds (GILTS), corporate bonds and equities.

Your fund continues to be invested and securely held for your benefit. Like any investments, the value can go down as well as up and you may not get back the money originally invested.

You may have altered or created a new portfolio during the period the fund suspended. Please see our FAQs below for guidance in this situation.

Next steps

Your investment portfolio should be considered as a medium to long term holding. If you don’t currently need to access your portfolio, then there is no action required. If you do need to access monies from your portfolio, you may want to contact your Financial Planning Manager to make sure all your options are considered. Please note, you will not be able to make any withdrawals from this fund until the suspension is lifted.

If you hold this fund or are in the process of a transaction which involves them, Aegon will contact you regarding this as soon as possible. Aegon will also notify you when the fund suspensions are lifted.

FAQs

Continued increased withdrawals could lead to fund managers having to sell properties held within the fund at potentially lower than market value prices. This is due to the demand to raise levels of cash within the fund so quickly.

The temporary suspension of dealing allows the fund managers to take time to sell properties, in a controlled manner, at more competitive prices.

Yes, the fund managers will continue to actively manage the fund and will continue to report on any investment activity as normal.

The fund uses independent valuers to value their property assets. Since the suspensions were implemented, the funds’ independent valuers have moved from valuing these assets on a monthly basis to a weekly basis.

You can either log into your Aegon Customer Dashboard or check our fund table.

There is no maximum time limit on how long the fund can be suspended. The fund group is not able to say how long they expect their respective suspensions to last. They are monitoring the situation very closely and this is formally reviewed every 28 days (from the date of suspension).

Your money continues to be invested and securely held for your benefit. Like any investments, the value can go down as well as up and you may not get back the money originally invested.

The suspension has been implemented in order to ensure the fund manager can conduct property transactions in such a way that allows them to get the best possible deal for existing customers.

Aegon will be unable to sell units from the above property fund, therefore they will process the part of the transaction which involves funds which are not suspended, and the property monies will be retained.

If you request a withdrawal consisting entirely from funds which are not suspended then this will go through as normal.

If you request a withdrawal using a proportional spread from your portfolio Aegon will be unable to sell units from the above property fund, therefore they will process the instruction spreading the withdrawal amount between your non suspended funds, and the amount invested in property will remain. This will alter your percentage proportion of funds held within property compared to your whole portfolio, so please be mindful of this.

Yes – your income will not be affected.

If you have initiated a transaction which involves the above fund, and Aegon cannot process the transaction, they will contact you and inform you of your options.

If your ISA is from previous years' contributions i.e. you haven’t put any money in to it this year, then any money that is not invested in a suspended property fund can be moved in the normal way. Your current provider will simply retain the money in the property fund as a Stocks & Shares ISA until the suspension lifts. The current provider should explain your options for the remaining money but will aim to complete your request to move it as soon as they can.

For any ISA contributions in the current year, the whole Stocks and Shares ISA has to be moved together, so as the property part cannot be moved at present the whole of this year’s contributions will need to stay where they are until the suspension lifts.

You can still withdraw monies from funds which don’t involve property, but please be aware that a standard withdrawal/redemption from an ISA will lose its ISA status unless transferred to another ISA product. Please see above FAQ on full and partial withdrawals.

Any regular premiums/payments which don’t involve the above fund will be processed as normal.

If your payment is due to the above fund during the period of the suspension Aegon may need to change your Direct Debit instruction to pay the amount originally instructed to enter the above fund into the appropriate product cash facility.

Aegon will contact you if this situation occurs and give you information on options for your regular payment moving forward.

You may see information on the M&G website referring to Direct Debits being cancelled. Please be assured that this only refers to customers directly trading with M&G, and the proportion of your Direct Debit set up through NBS/Aegon will enter the appropriate product cash facility as above.

Aegon will be writing to all customers affected, including those who have initiated transactions recently, or simply hold the fund, explaining the current situation and what to do.

If you have any specific questions around your investments that haven’t been answered within these pages, please contact your Financial Planning Manager, or call us on 0800 030 4078 Monday to Friday, 9am to 5pm.

This is not intended to promote or provide a recommendation in relation to our investment service. Any comments made are intended to provide general information only. If you would like any further information, please contact your Financial Planning Manager.

The value of your investment can go down as well as up so you may get back less than you originally invested.

If you have any specific questions around your investments that haven’t been answered within these pages, please contact your Financial Planning Manager, or call us on 0800 030 4078 Monday to Friday, 9am to 5pm.

This is not intended to promote or provide a recommendation in relation to our investment service. Any comments made are intended to provide general information only. If you would like any further information, please contact a Financial Adviser.

The value of your investment can go down as well as up so you may get back less than you originally invested.

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