The FCA has published a Consultation Paper (CP20/15) on proposed measures to address the potential harm caused by a mismatch in liquidity in certain UK authorised funds that invest directly in property. The FCA states that it is seeking to reduce potential investor harm caused by the fact that the redemption terms for dealing in units of some property funds are not aligned with the time that it takes to buy or sell the buildings that the funds invest in.
The FCA proposes to introduce a notice period of between 90 and 180 days for property funds to process investor redemption requests. The FCA estimates that the introduction of notice periods could “potentially deliver a material increase in returns to property fund investors” as the funds could operate in a “more stable and sustainable way, with more assets invested in property and less in cash”.
Fund managers will be expected to treat this proposal as a significant change under the Collective Investment Schemes sourcebook (COLL) and notify investors before any change comes into effect. They will also have to obtain FCA approval for any changes to a fund’s instrument and prospectus. The FCA is not proposing specific transitional arrangements for the new rules.
The consultation period closes on 3 November 2020, following which the FCA intends to publish a Policy Statement and final rules in 2021.
FCA Consultation Paper CP20/15: Liquidity mismatch in authorised open-ended property funds
Webpage
Press release
Please see the Brexit section for an item on HM Treasury’s Policy Statement on amendments to the UK PRIIPs Regulation.
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