interactive investor concerned that responsibility is being palmed off on sophisticated investors and advised consumers.
Interactive investor, the UK’s second largest direct-to-consumer platform, today responds to the FCA’s consultation on a Long-Term Asset Fund.
While supportive of the intentions behind the fund, interactive investor questions what benefits prospective investors will receive in exchange for accepting restrictions on accessibility, other than redeeming at NAV.
The proposals do not appear to improve upon existing structures already in place, for example, in the closed-ended sector.
Moira O’Neill, Head of Personal Finance, interactive investor, says: “While these proposals require open-ended funds to match the underlying liquidity of the assets in which they invest with the redemption terms that they offer to investors, there is no guarantee that this approach will be entirely successful when it comes to managing liquidity risks.
“We have to ask if open-ended funds want the right to invest in illiquid assets without the accompanying obligation to offer daily access to their own investors, what do investors get in return for that sacrifice? The fixation on open-ended funds when it comes to illiquid assets is bewildering. Investment trusts come with their own concerns, such as discount or premium issues. But they can be fully invested, and investors can buy or sell at the beat of their own drum, not someone else’s.
“We also note the proposals look to limit distribution to professional investors and sophisticated private investors, or those who have taken advice. It is easily forgotten that many retail investors are the end beneficiaries of professional investors through pension providers, wealth managers and financial advisers. We would be interested to know how many people in frozen property funds were there because they took ‘advice.’ If the regulator is to push ahead with a Long-Term Assets Fund, it must also protect consumers’ interests. Passing the buck on to sophisticated investors and advisers strikes the wrong chord.”
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