Changes to the structure of open-ended funds holding illiquid assets proposed by the Bank of England (BoE) are “likely to be complicated to execute and explain” and would require “a change in attitude from investors, fund managers and platforms”, experts have warned.
In a warning that liquidity in open-ended funds poses a systemic risk to financial stability, the BoE's outgoing Governor Mark Carney said "there should be greater consistency between the liquidity of a fund's assets and its redemption terms". The BoE's latest Financial Stability Report recommended: "Redeeming investors should receive a price for their units in the fund that reflects the discount needed to sell the required portion of a fund's assets in the specified redemption notice period. "[And] redemption notice periods should reflect the time needed to sell the required portion ...
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