FCA finds funds should consider external risks

FCA’s review of fund suspensions and pricing adjustments following the Brexit vote has indicated that property funds should plan better to take external events into account so they can deal with liquidity risks.  It found that some daily-dealt property funds suspended dealing or applied pricing adjustments in the immediate aftermath of the vote because they could not realise assets quickly enough to meet redemption demands.  It notes that open-ended daily-dealt funds that invest in illiquid assets will always face the possibility that they cannot realise assets quickly enough to match redemptions, but they can use liquidity management tools to reduce risks. But when they use these tools, they should communicate clearly with investors about the effects on redemption.

FCA will elaborate on the findings of its view in the wider context of its review into illiquid assets and open-ended investment funds.