On 19 March 2020, the FCA published a speech given by Edwin Schooling Latter (Director of Markets and Wholesale Policy, FCA) entitled Open-ended funds investing in less liquid assets.
In his speech Mr Latter states that the FCA and the Bank of England (BoE) are continuing to work to evaluate the costs and benefits of possible policy measures to achieve greater consistency of fund redemption terms with the liquidity of funds’ assets. The FCA and the BoE welcome input into their work from investors and industry.
Mr Latter also states that the regulator recognises that a daily redemption promise may be attractive for many fund investors. And for many funds investing overwhelmingly in highly liquid assets, this does not create a liquidity mismatch. The FCA wants open-ended funds to provide a structure through which investors can safely invest in less liquid assets which offer attractive expected returns and which supports investment that benefits the wider economy. Recent experiences may help rational and well-advised investors to recognise that daily redemption funds are unlikely, however, to be the safest or most profitable way of investing in less liquid assets. The FCA feels that now is the right time to address this, and make progress on embedding the right structures for open-ended funds investing in such assets.