FCA has published a discussion paper looking at the issues that arise when open-ended funds invest in illiquid assets, such as real estate, infrastructure and unlisted securities. It seeks views generally, but also raises specific questions, such as how best to strike the balance between the potential strong returns this type of investment can bring to investors who want to stay in the fund, against the interests of investors who want to withdraw at short notice. If a market event triggers an upsurge in redemption requests, funds can suffer liquidity management problems. FCA is considering whether it needs to change its regulatory approach and suggests certain actions it might take. Possible actions include separating the investments of professional investors from those of retail, or introducing rules or guidance on liquidity “buckets”. FCA is also interests in views on how well investors understand the risks of funds that offer frequent redemptions but invest in illiquid assets. Most of the funds are set up as an authorised NURS, so must have a full prospectus available to investors, but FCA wonders whether better targeted or enhanced communication would be a good idea. FCA asks for comments by 8 May.