09 Jul 2020

Chris Woolard, Interim Chief Executive at the FCA gave a speech on Wednesday in which he announced the FCA’s intention to openly consult on potential policy options to better manage the liquidity mismatch of open-ended daily dealt property funds.

You can view the full speech here.

He acknowledged that the fund management industry has shown considerable resilience in the face of exceptional market conditions. When material uncertainty over commercial real estate values made it necessary to suspend daily dealing in open-ended property funds, fund managers worked with the FCA to make this happen quickly and safely.

It is well documented that the FCA and Bank of England have been looking at the risks arising from the liquidity mismatch between assets held by a fund and its redemption terms. The FCA therefore plan to consult over the summer, on whether long-term investor interests would be better served by finding a way in which these funds could safely transition to a structure in which the liquidity of the fund units is better aligned with the liquidity of fund assets.

Quote from Paul Richards, Managing Director of AREF:

"We look forward to seeing more detail on the FCA's proposals to align investors' expectations of daily redemptions, with the liquidity of fund assets. The property fund industry has faced unprecedented circumstances in recent years which have seen funds suspended to protect investors. This consultation will offer a welcome opportunity to reflect on how these funds have functioned and where there is room for innovation to ensure that we continue to meet the needs of savers and investors." 

Author

Jacqui Bungay

Jacqui Bungay

AREF Secretariat, AREF

Jacqui provides policy guidance and secretariat services to the AREF Board and AREF Management Committee as well as the following AREF Committees: Corporate Governance, ESG & Impact Investing, Investor, Public Affairs, Research and Information and Retails Funds. In addition, Jacqui monitors members’ compliance with AREF’s Code of Practice. 

Jacqui joined AREF in 2014 after working for over 25 years in fund compliance, client relationships and administration at Natwest Trustee & Depositary Services.