The UK financial watchdog seems to still be getting to grips with how best to address the potential for harm to investors from the liquidity mismatch in open-ended property funds.
An August 2020 consultation raised the prospect of introducing a notice period of between 90 and 180 days before investors could access their funds.
Unsurprisingly, the feedback from industry emphasised the difficulties fund managers and other firms would face in building the appropriate infrastructure to implement the changes.
The FCA said a final decision on notice periods would not be taken until Q3 2021, “at the earliest”.
It stressed, however, that if it does proceed with applying a mandatory notice period, firms will be given a “suitable implementation period” of 18-24 months.
LTAF
The delay in announcing a final decision gives the FCA time to gather feedback on yet another consultation, this time on the introduction of a new fund regime.
The long-term asset fund (LTAF) is designed to invest in long-term illiquid assets.
Open-ended, they would be able to invest in assets that are often referred to as ‘productive finance’; namely venture capital, private equity, private debt, real estate and infrastructure.
The FCA said that investment in productive finance assets has the potential to yield good long-term outcomes for investors, while also supporting economic growth and job creation.
“We propose a flexible regime that aims to offer an appropriate level of investor protection and to address the specific risks of investing in long-term illiquid assets via an open-ended fund,” the consultation states.
“Initially, we propose to restrict distribution of the LTAF to professional investors and sophisticated retail investors.”
The regulator is seeking view on whether, and how, it could safely permit future wider retail access to these funds than the initial proposal would permit.
The LTAF consultation, which can be found here, closes on 25 June 2021.
