FCA seeks feedback on patient capital in retail funds

Budget 2018 sought to reduce barriers to investing in illiquid UK growth businesses

Financial Conduct Authority

The Financial Conduct Authority (FCA) is seeking feedback from the industry on how to open up alternative asset classes, including private equity and venture capital, to retail investors as part of its response to the government’s patient capital review.

The regulator said in a press release it wants to enable investors to access a broader range of assets through unit-linked funds.

FCA executive director of strategy and competition Christopher Woolard said: “We are proposing changes to allow retail investors greater access to long-term investment opportunities.

“We are also seeking views to help us identify any unnecessary barriers to investment in patient capital through authorised funds. We will ensure that any changes continue to provide an appropriate level of protection for consumers.”

Alongside private equity/debt and venture capital, the proposals would open up infrastructure and real estate to more investors.

It could affect a separate FCA consultation on open-ended funds that hold illiquid assets, which was launched following the gating of a number of property funds in the aftermath of the Brexit vote. Patient capital assets are typically illiquid, the FCA noted in a discussion paper connected to the consultation.

While the regulator felt liquidity risks in unit-linked and authorised funds were successfully managed following the UK vote to leave the European Union, it noted the £27bn of illiquid assets, mainly commercial property, held in unit-linked funds was very low in proportion to overall assets of £914bn.

The FCA is seeking feedback on whether any changes to the authorised fund rules are necessary with a deadline of 28 February 2019.

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