12 Dec 2018

This event was kindly hosted by Janus Henderson.

Guy Glover, Fund Director at BMO Real Estate Partners and Chairman of AREF’s Retail Funds Committee, gave a welcome and introduction to the speakers and the event proceedings. The three main areas of the paper were the focus for the morning’s discussion: suspension; improving liquidity risk management; increased disclosure. All the presentation slides and questions discussed can be found here.

Lee Bruce, CBRE, spoke about the FCA’s findings from their review of property fund suspensions in 2016 and their proposal regarding mandatory suspensions due to material uncertainty. This led onto the first breakout session.

Each table discussed questions 7 to 9 of the consultation paper, regarding whether they agreed with mandating suspensions in times of material uncertainty and whether 20% of the scheme property is the right threshold level to set for mandatory suspension. There were also three questions posed by AREF asking whether the FCA’s proposal would lead to consistent actions being taken by property funds, what issues people sae in lifting material uncertainty and whether delegates felt the valuers were the right party to trigger suspension and whether the Red Book definition of Material Uncertainty is clear enough.

Following an open discussion of some of the tables’ feedback, Guy then gave a brief walk-through of the FCA’s findings around liquidity risk management and their current proposals. In the following breakout, delegates discussed questions 13 to 15 of the consultation, regarding whether they agreed with the requirement for contingency plans and obtaining written agreements with service suppliers was the best way forward. AREF also asked whether there was agreement with the FCA’s assertion that managers had a broad array of liquidity management tools.

Guy also highlighted the proposed guidance around rapid sales of immovables and asked AREF’s questions of whether everyone agreed with the FCA that “rapid sales” were a liquidity management tool and if the valuers were able to adequately value on a rapid sale basis. The FCA consultation questions 16 to 19 were also discussed, asking whether the FCA’s new guidance clarifying the mechanism for rapid sale price adjustments was helpful, whether this should be in the fund prospectus and if the FCA’s proposals would discourage large liquidity buffers and first mover advantage.

David Grocott, senior product development manager, Janus Henderson, then took delegates through the final session on “inherently illiquid assets” and increased disclosure. Delegates were asked their thoughts on the proposed name “Fund Investing in Inherently Illiquid Assets” (FIIA), the 50% threshold and several other questions around the FCA’s proposals regarding increased disclosure. Please see the presentation for the full list of discussion points.

The write-ups of each tables’ feedback from the many important discussion points today shall be taken into consideration as AREF compiles its formal response to the consultation paper, which will be made available to members in due course.

A link to the full consultation paper can be found here. AREF welcomes any further feedback from members, investors and other interested parties unable to attend this roundtable event. Please forward your thoughts to us at info@aref.org.uk. The Retail Funds Committee sits again on the 18th December and this consultation will again be the priority for discussion on that agenda.

AREF would like to thank Lee Bruce, David Grocott and Guy Glover for their work on this roundtable discussion and Janus Henderson for hosting the event.