Concerns over liquidity in open-ended funds ‘go beyond property’

26th March 2021 15:27

Jemma Jackson from interactive investor

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interactive investor comments on Bank of England and FCA joint research.

Interactive investor, the UK’s second-largest DIY investment platform, comments on today’s joint Bank of England and Financial Conduct Authority (FCA) survey, ‘Liquidity management in UK open-ended funds’

Moira O’Neill, Head of Personal Finance, interactive investor, says: “Liquidity issues around open-ended funds have tended to focus on property, and today too many property fund investors still have their savings sat on ice - a disgrace.

“But today’s research hints at a broader open-ended issue that has until now been hidden under the carpet – namely, that fund managers are often overly optimistic about how quickly they can sell their holdings.

“This is something we have been concerned about for some time. In November, we encouraged the FCA to consider whether current disclosure requirements around illiquid assets go far enough.

“We also said that the FCA should also consider whether redemption periods should be applied to funds investing in illiquid equities (not just property). And with many fund managers apparently overestimating their liquidity, according to today’s research, the regulator has some careful thinking to do.”

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