part of a consultation on reducing the liquidity mismatch in open-ended
property funds, the Financial Conduct Authority (FCA) asked the industry to
respond to the potential introduction of a notice period for redemptions of up
to 180 days.
Independent consultant John Forbes told Property Week he was
concerned about the one-size-fits-all approach. “For some types of
property asset, 180 days might be an unnecessarily large number,” he said.“I do
not think notice periods should be the exclusive answer to the issue with
funds. [The FCA] should be encouraging a greater choice of vehicle so that
retail investors can choose what they want.”
Others noted that investors would not know the price at which
they can redeem their investment until the end of the notice period, leaving
them vulnerable to a fall in value during that time.
Charles Incledon, client director at Bowmore Asset
Management, said the move would put property funds off-limits to many
“If these rule changes are made, then a lot of financial
advisers will just stop recommending open-ended property funds to their private
clients,” he said.
However, others cautiously welcomed the proposal. Ian Mason,
head of the UK financial services regulatory team at Gowling WLG, said that
although property investors would need to plan ahead more and look at the
longer term, a notice period should stop “the last-minute rush from worried
investors that we have seen in recent years”.
Christopher Woolard, interim chief executive of the FCA, said:
“We think that our proposals will help further our consumer protection
objective by reducing the number of fund suspensions, preventing unsuitable
purchases of funds, [and] increasing product efficiency for fund managers.
“We hope the proposed new rules will directly address the
liquidity mismatch of these funds, making them more resilient during periods of
stress and allowing them to operate so that all investors are treated equally.”
Open-ended funds have been mired in controversy since a wave in
redemptions forced some to close at short notice.