FCA consultation into authorised property schemes (CP18/27)

Further to the EU referendum in June 2016, which triggered the suspension of dealing in some non-UCITS retail scheme (NURS) property funds, the FCA has been considering that market event and how well operators of these schemes responded and indeed whether the existing tool kit as contained in COLL is sufficient to deal with exceptional events in terms of the management of liquidity and containment of these risks to such schemes without wider market contagion.

The FCA observed that the use of suspensions and other liquidity management tools generally worked as they were intended and prevented problems that property funds were facing from causing any wider market disruption.

However the FCA have published a consultation paper on this subject, with such consultation is open to 25 January 2019, and in particular are recommending the following summarised changes:

  • Change to the approach regarding suspensions, connecting the need for suspension with material uncertainty about the valuation of at least 20% of the scheme property and also allowing managers to suspend before exhausting liquid asset reserves (such as cash).


  • Enhanced focus on the need for detailed contingency plans, where an authorised scheme invests mainly in illiquid assets (i.e property) and to require depositaries to oversee the processes used to manage the liquidity of the fund.


  • The FCA is recommending that managers of NURSs should not build up or hold large cash buffers for a long period, merely to deal with the possibility of unanticipated high levels of requests from investors wishing to redeem their units/shares at some point in the future.


  • Enhanced disclosure to investors including:
    • Adding an “identifier” to the name of the fund to note its nature; and
    • Disclose details of the liquidity risk management strategies in the Prospectus.

North Star are experts in advising authorised real estate funds and their operators. If you would like further information about the proposals and what this may mean for your fund(s), please contact us.

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