A very brief newsletter about today’s publication by the FCA of a further consultation document on open-ended funds and immoveable assets and responses to its 2017 consultation DP17/1. 

The original consultation DP17/1 was published in February 2017 and ran until May 2017. It dealt with the behaviour of retail property funds in the immediate aftermath of the EU Referendum in June 2016. 

We produced an independent report for the Association of Real Estate Funds in April 2017 which was submitted to the FCA by AREF together with the AREF response to the consultation. 

The FCA have now published their follow-up consultation, a year later than originally anticipated. 

The consultation reflects broad conclusions that are in line with our 2017 report - funds operated appropriately within the regulatory environment set for them. Although there are specific areas within the framework that proved to be problematic, these can be corrected without starting again from scratch. 

The FCA proposals cover a number of areas:

a).  The introduction of a mandatory suspension of funds where pricing is unreliable due to uncertainty over the valuation of underlying assets;

b).  Improving liquidity management. There are two sides to this. Firstly to require contingency plans to deal with situations where there is a lack of liquidity and secondly to ensure that managers do not simply hold large cash buffers over a long period in anticipation of future liquidity events. This is likely to require considerable thought by managers;

c).  Increased disclosure and transparency. 

Our main disappointment with the proposals is that the opportunity to bring in changes to facilitate the development of less liquid funds for retail investors has been missed. John has been involved in lobbying on this since 2012 when he was still at PwC. We will continue to raise this. 

The consultation runs until 25th January 2019. 

You can find the consultation paper

You can find our 2017 report and associated materials here

You can find an article from yesterday’s IPE Real Assets about the proposals here

John will be covering this briefly at the Simmons & Simmons / IPSX seminar, "A new dimension for real estate investment management" in London this Thursday (11th October). John will be a panelist. For more details and to register please contact Hannah Bado here at Simmons & Simmons. 

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Helen Forbes
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