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FCA on daily alert as property fund outflows accelerate

FCA on daily alert as property fund outflows accelerate

The Financial Conduct Authority (FCA) will require property funds to provide daily liquidity updates following further outflows from the sector as Brexit uncertainty grows.

According to the Financial Times, the regulator has started monitoring outflows of property funds on a daily basis after becoming increasingly concerned about liquidity in the latest waves of redemptions. It is understood the watchdog has been doing this since late last year. 

The news comes after our sister site, Citywire Funds Insider, revealed earlier this year that Columbia Threadneedle and Kames Capital’s property funds, which manager around £3.7 billion between them, have taken a hit of around 6% after they repriced their funds on a 'bid' basis following significant outflows.

As the Brexit deadline nears, outflows from property funds continue with nervous investors withdrawing £315 million from property funds in December, according to the figures from Morningstar. 

This nears the volumes of redemptions seen in the wake of the UK’s decision to leave the EU in 2016, which resulted in property fund managers suspending trading and gating, leaving investors trapped in these funds for a period of time. 

 An FCA spokesperson said: ‘As you would expect, we regularly monitor markets and funds.  We are also in frequent contact with firms and continue to engage with them on a wide range of issues.’

The City regulator in October proposed tougher rules for property funds after the fallout from the Brexit vote.

Under its proposals, the regulator said fund firms will be required to label portfolios invested in illiquid assets such as property or unlisted equity as higher risk. 

'We will require more information to be disclosed about the liquidity risks, the liquidity management tools available to the fund manager, the circumstances in which they may be used and what impact they may have on investors,’ the FCA said in a statement at the time. 

In October, feedback to FCA's discussion paper and further supervisory work on open-ended funds investing in illiquid assets confirmed a major overhaul of the regulatory framework was not needed but there were improvements that could be made.


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