In August 2020, we published our consultation paper seeking to reduce the potential for investor harm that comes about because the terms for dealing in units of some property funds are not aligned with the time that it takes to buy or sell the buildings that the funds invest in.
Property funds tend to hold a significant cash balance. Otherwise, they might not have time to sell properties to pay investors who can request their money back at short notice.
If a fund runs out of cash, this can cause it to suspend dealings. As a result, this can cause investors to request their cash back in anticipation of such suspensions, potentially increasing the problem further.
We mainly consulted on whether property funds should be required to have notice periods between 90 and 180 days before an investment can be cashed. We also asked for any alternative proposals.
Who this affects
This feedback statement is relevant for:
- managers of UK authorised property funds
- depositaries of these funds
- feeder funds that invest in these property funds
- master funds that invest in property, which these property funds invest in
- ancillary service providers
- providers of investment services offering access to these funds, including
- Self‑Invested Personal Pension (SIPP) and Small Self‑Administered Scheme (SSAS)
- providers, as well as Individual Savings Account (ISA) managers
- distributors of these funds
- investment intermediaries who advise on or invest in these funds
- unit linked insurers who offer insurance contracts linked to these funds
- discretionary wealth managers, including those who offer model portfolios
- other professional or institutional investors
This will also interest consumers:
- who invest in UK authorised property funds, or who are exposed to these
- funds through their pension contributions or their long‑term life assurance policies,
- which are affected by our proposals in this paper
Next steps
We are considering our next steps in view of the feedback received.
We will not take a final decision on our policy position until Q3 2021 at the earliest. This is because we have taken the feedback into consideration, specifically around the operational work necessary for fund managers and most other firms to support notice periods.
If we do proceed with applying mandatory notice periods for property funds, we will allow a suitable implementation period before the rules come into force, to allow firms to make operational changes.
We note feedback that 18 months to 2 years would be an appropriate period.