: To ask Her
Majesty's Government what steps they are taking to impose
stronger investor protections where illiquid assets are held in
funds.
: The
government works closely with the financial services regulators
to ensure appropriate investor protections are in place where
illiquid assets are held in funds.
In September 2020 the Financial Conduct Authority (FCA)
introduced rules to make liquidity management in certain funds
more transparent and predictable. These include the requirement
that some funds suspend if there’s material uncertainty regarding
the value of 20% of the fund’s assets. In August 2020, the FCA
consulted on introducing notice periods for open ended property
funds, in order to align the funds redemption terms with the
liquidity of the underlying assets.
In July 2021, the Bank and the FCA concluded a joint review of
open-ended funds which outlined a possible framework for taking
forward improvements to certain liquidity management tools. These
conclusions will feed into ongoing international work with other
regulators.
The government also supports the work of the FCA to develop the
Long-Term Asset Fund (LTAF), an open-ended vehicle designed to
hold illiquid assets. The LTAF rules embed longer redemption
periods, high levels of disclosure, and strong liquidity
management and governance features in order to provide sufficient
investor protection. The FCA consulted on the LTAF between May
and June this year and published the final rules for the new
structure on 25 October.
