M&G Property fund returns to creation pricing

The M&G Property fund moved from a cancellation to a creation basis last Friday.

The creation price represents the mid-price of a fund plus an amount added on to represent any dividends or uninvested capital and dealing costs. A cancellation basis is where a group sets a lower bid price for a fund when there are net redemptions and it has to cancel units.

Many property funds moved to a cancellation pricing basis over 2008 to protect investors from the cost of cancelling units held in the funds. The steps reflected large scale redemptions from the property sector last year, which stretched liquidity, and caused many funds to suspend dealing, including the New Star International Property fund and Aviva Investors European Property fund.

Since the stockmarket bottomed in March, however, there are signs that the property bear market could be abating. In May, British-domiciled property funds saw positive inflows for the first time since April 2008 with net inflows of £2m.

The move by M&G adds further weight to the suggestion that the worst news for the sector could already be passed.


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