The FCA has today launched a consultation to address the liquidity mismatch in open-ended property funds, with the main proposal being a notice period of between 90 and 180 days for withdrawals from open-ended property funds.
Ryan Hughes, head of active portfolios at AJ Bell, comments:
“The liquidity mismatch that can occur in open-ended funds has been in sharp focus since the Woodford debacle and property funds are where this problem most often rears its head. There is currently over £12.5 billion of investors’ savings trapped in open-ended property funds that are suspended.
“The FCA’s proposal to introduce a notice period for withdrawals from open-ended property funds is eminently sensible. It will ensure that property fund managers can manage their portfolios more effectively and give them time to sell properties in a controlled way in order to meet redemptions.
“Perhaps more importantly it should also change the way investors view property funds. Property should be seen as a long-term investment but daily trading on these funds has led to investors assuming they can get their money back whenever they want whereas in reality this has not been the case in many instances. Having a notice period of between 90 and 180 days should change this perception and means investors are less likely to get a nasty surprise when they want to withdraw their savings.”