Investors in funds focused on property, infrastructure and private companies will have to wait three months to withdraw their money under new rules proposed by the Financial Conduct Authority. The move, announced on Thursday, is designed to avoid liquidity mismatches at funds holding hard-to-sell assets that cannot meet investor requests to withdraw, as happened during the 2022 market turmoil after then prime minister Liz Truss's mini-budget and during the 2020 pandemic.
The FCA said funds with a majority of their holdings in illiquid assets such as property, infrastructure or unlisted companies would no longer be able to offer daily withdrawals. Under the proposals, investors in such funds would have to give 90 days' notice before taking out their cash. Michelle Beck, FCA director of markets, said the rules would help firms make clear whether they offer quick access or are built for longer-term investments.
It is the second time in six years the regulator has made such proposals. In 2020 it considered a notice period of up to six months but abandoned the idea after industry pushback. In 2022, a sharp rise in bond yields made commercial property less attractive, prompting a surge in redemption requests and led property fund managers to defer withdrawals. Neil Woodford also faced scrutiny over the 2019 suspension of his flagship £3.6bn equity fund.
The regulator estimates 17 funds, with an aggregate net asset value of about £7.22bn, would be caught by the proposals. They would have two years to comply and must give investors at least a year's notice. Feedback is invited until December 11. The Investment Association welcomed the move, particularly proposals allowing Self-Invested Personal Pensions to keep investing in funds with illiquid assets.
Source: Financial Times Companies · Summarized by HeadlinesBriefing