On 27 February 2020, the FCA published Feedback Statement 20/2: Patient Capital and Authorised Funds – Feedback on DP18/10 (FS20/2).
On 12 December 2018, the FCA published Discussion Paper 18/10: Patient Capital and Authorised Funds (DP18/10). In DP18/10 the FCA explored the impact of the regulatory regime on investment in patient capital assets through authorised funds. Alongside DP18/10 the FCA published a consultation paper on the changes to permitted links rules to facilitate investment in patient capital.
In FS20/2 the FCA reports that it has found no inappropriate barriers to investing in long-term assets within its authorised funds regime. Broadly, respondents found the current authorised funds regime fit for purpose for long-term investments by professional and sophisticated retail investors. For broad retail distribution funds, the FCA accepts that barriers do exist which limit the range of available investment options. However, the FCA feels that it is not clear that these barriers are inappropriate or how they might be relaxed without introducing a degree of risk that is not appropriate for retail investors. The FCA also notes that other investment products, such as investment trusts, already provide alternative ways for retail investors to access long-term investments.
Among other things, the FCA is working with the Bank of England’s (the BoE) Financial Policy Committee (FPC) to assess how authorised funds’ redemption terms can be better aligned to the liquidity of the underlying assets. Further information on the work on liquidity risks in open-ended funds can be found in the BoE’s July and December 2019 editions of the Bank’s Financial Stability Report. The FCA will also be considering any rule changes that may be recommended upon completion of the FPC work later this year.