M&G Property Fund
M&G decided to suspend trading in their property fund a couple of days ago. Property funds may invest in several areas, including direct investment into commercial buildings and property. this type of fund can be quite illiquid, i.e to obtain cash actual, physical buildings may need to be sold in order to raise funds to meet requests for cash. Normally funds of this nature will hold enough cash to cover withdrawals, but sometimes this isn't enough.
This illustrates how important it is for investors to not rely on one sector or investment area. A well invested portfolio will hold funds in a variety of different investment areas; for example one of the risk rated portfolios we use for clients holds 4.8% of the overall funds in the commercial property sector, spread between five different funds. This means that short terms blips like the M&G fund suspension will have little effect on the overall investment return, if any.
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