* M&G to waive 30% of annual charge during suspension
* Other property funds say they are still open
* Financial Conduct Authority working closely with M&G
(Adds detail, comment from other fund providers)
By Noor Zainab Hussain, Carolyn Cohn and Sinead Cruise
LONDON, Dec 4 (Reuters) - British fund manager M&G
Investments suspended dealing in its flagship UK
property fund on Wednesday, blaming Brexit uncertainty and
weakness in the retail sector for a surge in investor requests
to cash out.
The suspension comes hot on the heels of the high-profile
meltdown of investment veteran Neil Woodford's equity income
fund and applies further pressure on regulators to increase
investor protections on open-ended funds.
Britain's Financial Conduct Authority (FCA) opened an
investigation into the June suspension of Woodford's now-closed
equity fund and last month said asset managers have "a central
duty" to ensure effective liquidity management of their funds.
Fund managers offering funds that allow investors to
withdraw money at will can run into problems when assets cannot
be sold fast enough to cover exit requests.
Seven property funds with 18 billion pounds ($23.1
billion)under management froze after the June 2016 Brexit
referendum, while Woodford's flagship fund was locked for four
months before it closed in October.
Unusually high and sustained outflows from the 2.5 billion
pound ($3.2 billion) M&G Property Portfolio have coincided with
a period of continued Brexit-related political uncertainty, M&G
Investments said, adding that it had applied a temporary
suspension in dealing to protect the fund's customers.
The fund manager also said that structural shifts in
Britain's retail sector had made it difficult to sell some of
its largest assets. The fund has about 40% of its assets in
commercial retail property.
The fund will continue to be actively managed in suspension,
M&G said, adding that it would waive 30% of its annual charge
until dealing resumes.
SLIDING ASSETS
The temporary suspension will allow time to raise cash
levels to pay redemptions while ensuring that asset sales are
achieved at market prices and investors in the fund are
safeguarded, M&G said.
Britain's top property investment funds have shed almost 10%
of their combined assets this year as investors fret about the
impact of Britain's exit from the European Union.
Data from fund industry tracker Morningstar showed that each
of the 10 biggest open-ended property funds shed assets between
January and August this year as investors pulled cash from the
sector.
M&G Property Portfolio, which Morningstar data shows is
Britain's second-biggest commercial property fund behind Legal &
General's UK fund, was worst hit with net outflows of
more than 750 million pounds.
Other funds that registered significant outflows at that
time included Aberdeen UK Property and Janus Henderson UK
Property.
Amid concerns that the M&G suspension could trigger a
stampede across the sector, Reuters sought details on the
liquidity positions of several large asset managers running
open-ended real estate funds.
Legal & General, Columbia Threadneedle and Royal
London Asset Management did not immediately respond to a request
for comment.
Kames said its fund remains open. Aberdeen
Standard Investments, Aviva Investors, BMO and
Janus Henderson said their funds were open and had high
levels of cash.
The FCA said it is working closely with M&G, the fund's
authorised corporate director and the fund's depositary "to
ensure that timely actions are undertaken in the best interests
of all the fund's investors".
($1 = 0.7794 pounds)
(Reporting by Noor Zainab Hussain in Bengaluru, Carolyn Cohn
and Sinead Cruise in London
Additional reporting by Huw Jones
Editing by Shounak Dasgupta and David Goodman)