FCA has published feedback on its discussion paper on Patient Capital and authorised funds. The paper had asked whether there are any unnecessary barriers to investing in long term (patient) assets through authorised funds. The Patient Capital Review had shown enthusiasm from entrepreneurs for start-ups but that investment to scale up was not as strong.
The Government had looked at why funds might not provide this longer-term finance. One key problem was the possibility of investors wanting to redeem in significant volumes within a short period – which resulted in suspension of dealings in several NURS property funds in the wake of the referendum. As a result, FCA started to look at liquidity management tools available to fund managers and made new rules and guidance that will take effect on 30 September aimed at better educating investors, reducing the potential for some to gain at the expense of others and improving the quality of liquidity risk management.
Then, following the suspension of dealings in the Woodford fund, which was a UCITS, and the subsequent decision of its ACD to close it, it became clear the problem was not confined to NURS.
In response to FCA’s discussion paper, though, no inappropriate barriers to investing in long term assets were apparent, at least where the investors were professional and sophisticated retail investors. For broad retail funds there is a limit to the range of available options, but FCA does not see these barriers as inappropriate, nor does it see how to relax them without introducing an inappropriate degree of risk. It will look later in the year at any potential further measures it could introduce. The Investment Association had proposed a new type of authorised fund designed to invest in long term assets, which FCA will consider.