UK takes small step to solving fund liquidity mess LiamWardProud
The Bank of England and Financial Conduct Authority on Dec. 16 said open-ended funds, which allow investors to redeem their money with as little as a day’s notice, should match their redemption terms with the liquidity of the assets they hold.
Investors who wanted to sell out of, for example, a commercial property fund at a day’s notice would have to do so at a discounted price. The discount should match the haircut the funds’ managers would have to take for a similarly quick sale of the underlying shopping malls and office blocks in the portfolio.
The BoE and FCA published their initial findings from a review of mismatches at many funds that promise daily redemptions even though they hold assets that are hard to sell.
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