Property  

FCA eyes 180-day wait for property fund withdrawals

The City watchdog said it did not expect the proposals to prevent property funds from suspending in the future where this was in the interest of investors, but fund managers would not be able to cancel redemption requests placed prior to a fund suspending.

However, the period during which a fund is suspended would count towards the notice period. 

For example, if a fund operates a 180-day notice period and an investor placed a redemption request 120 days prior to a fund suspension, and if the fund was suspended for 50 days, the manager would need to redeem the investor’s holding 10 days after the fund suspension ended.

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 by increasing product efficiency for fund managers.”

The consultation remains open to responses until November 3, 2020 and the FCA will publish a policy statement with final rules as soon as possible in 2021.

The problem

Issues surrounding illiquid holdings in property open-ended funds have been highlighted on several occasions in recent years, most notably by the suspension of all UK property funds available to retail investors, with £12.8bn of assets between them, in the third week of March.

The portfolios were gated because the coronavirus crisis had caused “material uncertainty” in the UK property market, meaning valuers were unable to value the assets within the funds with the same degree of certainty as would otherwise be the case.

The illiquid nature of property meant a reliable price was not always readily available. This also sparked a number of funds to gate in the wake of the EU Referendum.

High levels of redemptions can also cause a fund's suspension, such as when M&G suspended its £2.5bn property portfolio fund in December.

imogen.tew@ft.com

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