Illiquid assets and open-ended funds

09 February 2017

Liquidity management is a topical issue in the funds world and it was thrown sharply into focus for managers of open-ended funds following the unexpected Brexit referendum result.

This was particularly so for those managers of funds investing in property who were forced to suspend dealing because they could not meet redemption requests.

The FCA was proactive in engaging with such managers in the week leading up to the referendum and has since undertaken supervisory visits to gain a deeper understanding of the liquidity challenges faced in extraordinary market circumstances.

On 8 February the FCA published Discussion Paper 17/1 “Illiquid assets and open-ended investment funds” which revealed what it had learnt from the “test” provided by the referendum and its subsequent supervisory work. Whilst it was generally happy with the way in which mangers dealt with the liquidity crunch, the FCA now seeks to promote discussion on whether any additional rules or guidance would be helpful in assisting managers to comply with their liquidity management obligations.