Andrew Watson, director of advisory and partnership sales at M&G

M&G property portfolio converted into PAIF

M&G Investments has converted its GBP2bn M&G Property Portfolio from a unit trust into a property authorised investment fund (PAIF) structure.

The conversion took place on 18 January 2013 and is believed to be the first retail investment fund to convert.

The M&G PAIF, an open-ended investment company will retain its name of M&G Property Portfolio and the investment process will remain unchanged.

A large proportion of existing unitholders who qualify as tax-exempt, such as ISA or Junior ISA investors, will now be eligible to benefit from the favourable tax treatments available to PAIFs and will receive income gross of tax.

The investment objective of the PAIF will remain the same as the current M&G Property Portfolio: aiming to maximise total return through investment mainly in commercial property. The PAIF will invest in a diversified portfolio of commercial property, mainly in the UK, seeking to add value through strategic asset allocation, stock selection and asset management.

Andrew Watson (pictured), director of advisory and partnership sales at M&G, says: “PAIFs provide investors with a tax efficient retail property fund structure and all eligible investors can enjoy these benefits which will result in more favourable tax treatment on distribution payments.  The M&G Property Portfolio is a pure bricks and mortar fund that is consistently popular among investors and so the broader appeal of a PAIF structure is an important step in the development of our property capabilities. We look forward to demonstrating the success of our philosophy and process to a greater number of investors.”

John Cartwright, chief executive of the Association of Real Estate Funds says: “AREF and its members have been working on the implementation of the PAIF regime for several years now and we are pleased to see that M&G is the first member firm to convert an existing retail investor fund.

“Property Authorised Investment Funds will benefit tax-exempt investors, such as ISA investors and pension scheme members, as they will no longer incur the 20 per cent tax which would previously have been applied on income received from their property investment.

“We believe that this is the start of a series of other PAIF conversions and launches being rolled out to retail investors.”

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