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GB - FCA discussion paper on open-ended funds investing in illiquid assets

01/01/2017

On 8 February 2017, The Financial Conduct Authority (FCA) has published a discussion paper which seeks stakeholder views on the practice of investing in illiquid assets through open-ended funds and the challenges that can pose to managers and investors.

On 8 February 2017, The Financial Conduct Authority (FCA) has published a discussion paper which seeks stakeholder views on the practice of investing in illiquid assets through open-ended funds and the challenges that can pose to managers and investors. Illiquid assets in the context of this Paper may include land and buildings, infrastructure and financial assets such as unlisted securities.

One of the key issues the Paper raises is the balance of interests between investors who want to withdraw their money and those who want to remain. Open-ended funds that invest in illiquid assets can encounter difficulties if investors expect to be able to withdraw their money at short notice. For example, it can be difficult for a manager to calculate the price of a fund every day if that fund invests in illiquid assets whose prices are calculated less frequently than every day.