The UK鈥檚 Financial Conduct Authority has launched a discussion paper looking into illiquid assets and open-ended investment funds.
The move comes just over six months after the UK鈥檚 vote to leave the European Union triggered redemptions by investors in open-ended property vehicles, causing liquidity issues and several funds to be 鈥榞ated鈥� in the referendum.
Megan Butler, executive director of supervision for investment, wholesale and specialist at the FCA, said: 鈥淲e want to engage with fund managers and the investors whose money they manage to understand what problems they think exist.鈥�
She said the FCA wants people to consider how well the current rules address those problems in open-ended funds, and what further regulatory intervention might be needed.
The FCA is seeking feedback by 8 May.
John Cartwright, chief executive of the Association of Real Estate Funds (AREF), said the body welcomed the discussion paper.
鈥淭he discussion paper is a timely development for the property funds industry and follows on from our own work to maintain a regulatory landscape that works in the best interests of its clients,鈥� he said.
AREF last year commissioned an independent report to assess the impact of the UK鈥檚 decision to leave the European Union on the real estate market and evaluate whether any improvements to regulation or fund structures could be made.
The research is due to be published for public consultation in March.
鈥淲e will be responding to the discussion paper in due course and we look forward to working with the FCA to identify any areas where 鈥榖est practice鈥� could be established, either by the industry itself or by the regulator.鈥�
Guy Morrell, manager of HSBC鈥檚 Global Property Fund, said: 鈥淎s we saw in the wake of the Brexit vote, some investors wanted to exit the commercial property sector quickly, but realised that this wasn鈥檛 immediately possible.
鈥淚 don鈥檛 believe that this was an intrinsic problem with property as an asset class, but rather about investors鈥� expectations around of how quickly they could sell fund holdings in unusual market conditions.鈥�
