The Financial Conduct Authority recently finalised their policy statement on illiquid assets and open-ended funds. The regulation looked to bring together the feedback from consultation with the fund management industry and a review of events that took place which led to open-ended fund suspensions. We have reviewed the outcomes of this study and assessed it for the changes it could have for advisers researching funds.
The regulator went into consultation on this topic when the UK direct property sector experienced high redemptions in reaction to the result of the EU referendum. A number of open-ended property funds had to be temporarily suspended after redemptions exceeded their liquidity buffers. Fund dealing was resumed later that year, but the event raised further questions over fund managers’ use of liquidity tools and how they manage the balance of interests between investors’ withdrawing funds and those remaining invested under distressed market conditions.
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