The Financial Conduct Authority has moved to halt the dramatic slide of investments out of UK-based property funds with an update of its guidance notes that also bids to ensure that any investors that remain are treated ‘fairly and accurately’.
The FCA has issued guidance for property investment firms after the decision by a number of funds, as reported, to announce the temporary suspension of trading in their property portfolios and feeder funds last week, affecting an estimated £13bn of investments.
The FCA said in a statement that the guidance is necessary to remind fund managers of their obligations to investors and outlines the FCA’s expectations in relation to the suspension of dealings in their funds.
Andrew Bailey, FCA chief executive, highlighted at the Financial Stability Report press conference last week, that the ability to suspend is built into the structure of these funds. But, he said, that the purpose is to create a pause to allow an orderly process of revaluation to happen without differential treatment of investors.
The FCA said that it has been in close contact with these funds for some time and it will continue to liaise with the funds as they keep the situation under review.
The statement read: “Following the result of the EU referendum, we are aware that some asset managers are experiencing higher than normal levels of redemption requests from investors in their funds.
“Fund managers have a duty to act in the best interests of all investors. Therefore they must consider how to ensure the on-going fair treatment of all investors in their funds in the context of the current market conditions.
“It is the duty of the fund manager to ensure that assets are valued fairly and accurately and to ensure that any subscriptions or redemptions of units take place at a fair price. Failure to do so may lead to some investors gaining at the expense of other investors in the same fund.
“If a fund has to dispose of underlying assets in order to meet an unusually high volume of redemption requests, the manager must ensure these disposals are carried out in a way that does not disadvantage investors who remain in the fund or are newly investing in it.”
The FCA said that in exceptional circumstances, fund managers should consider whether it would be in investors’ best interests to suspend dealing in a fund or range of funds. “We request that managers of authorised funds contact us in advance of any proposed suspension,” it added in a statement.
In these circumstances, the FCA said that fund managers should ensure that: the revised redemption price and the opportunity to cancel are clearly communicated to investors who have submitted a request to redeem their investment before or during the fund’s suspension; this communication explains the options that are available to investors and includes details of how to cancel the redemption requests; and investors are given sufficient time to make their decision and to seek appropriate advice.
This timeframe should take into account the types of investor in the fund and whether communications to these investors need to take place through an intermediary, the statement read.
Aberdeen Asset Management
Elsewhere, earlier today, Aberdeen Asset Management decided to extend the temporary suspension of the Aberdeen UK Property Fund and the Aberdeen UK Property Feeder Unit Trust by a further two days to 12 noon, 13 July.
A statement by the firm said that this will provide additional time for investors to consider their options in these exceptional circumstances, and further ensures that all customers are treated fairly.
Martin Gilbert, Chief Executive of Aberdeen Asset Management, said: “Following the application of the dilution adjustment the vast majority of trades submitted prior to temporary suspension last Wednesday have been reviewed and, in many cases, have been withdrawn by investors.
“We are sincerely grateful for the support we have received so far from those distributors and intermediaries who have worked tirelessly with us to ensure investors are aware of the actions we’ve taken and of the options they have.
“Whilst we are in a good position to lift the suspension today, given the exceptional circumstances and specific requests we have received from two large platforms, we believe it is appropriate to allow a further two days for remaining investors to be contacted in the interests of treating all customers fairly.”