On 7 May 2021, the FCA issued a statement on its work on liquidity mismatch in authorized open-ended property funds.

The statement refers to the consultation paper that the FCA published last August (CP20/15) that proposed measures to address the potential harm caused by a mismatch in liquidity in certain UK authorised funds that invest directly in property.  In particular, the FCA consulted on whether property funds should be required to have notice periods before an investment can be redeemed. The FCA suggested a notice period of between 90 and 180 days for these funds. The FCA also asked for any alternative proposals.

The statement also refers to a feedback statement that the FCA has now published (FS21/8).

In the feedback statement the FCA sets out the feedback it has received to its earlier consultation paper and its next steps.

The FCA states that it will not take a final decision on its policy position until Q3 2021 at the earliest. This is because the FCA has taken the feedback into consideration, specifically around the operational work necessary for fund managers and most other firms to support notice periods. The FCA also needs to address some of these operational challenges to make progress on new options for a Long-Term Asset Fund (LTAF), on which it is currently consulting. The FCA also states that if it does proceed with applying mandatory notice periods for property funds, it will allow a suitable implementation period before the rules come into force, to allow firms to make operational changes. The FCA notes feedback that 18 months to 2 years would be an appropriate period.