Tisa said that the proposals may cause more consumer and industry detriment than they seek to remove
The Investing and Savings Alliance (Tisa) has hit back at Financial Conduct Authority proposals to require notice periods of up to 180 days in open-ended property funds.
The FCA consultation closes three months after the proposals were first announced.
The regulator said in the original proposals that it considered 90 days to be an appropriate notice period, noting many investors will lock up cash in a term deposit for a similar period.
It also sought feedback on whether 180 days would be more appropriate given the illiquidity of the asset class. It is also looking into periods divisible by the seven-day week, such as 91 or 182 days.
But Tisa said in a press release on Tuesday that the proposals are likely to cause more consumer and industry detriment than they seek to remove.
The introduction of a notice period for all sales of these funds, irrespective of market conditions, will have significant consequences on all of those involved in the value chain including consumers, advisers, platforms, and property fund managers, said Tisa head of retirement Renny Biggins.
He said, bringing in a potential six-month delay will cause numerous problems, and the inaccessibility issue would effectively remove a whole cohort of consumers from being able to access this asset class and benefit from the diversification benefits they provide.
Biggins said a review of the last 10 years showed suspensions had not been a frequent occurrence and were “typically linked to Brexit and the coronavirus pandemic”.
During the first wave of the coronavirus pandemic a raft of UK direct property funds suspended as independent valuers, such as CBRE and Knight Frank, introduced material uncertainty clauses to their valuations.
This valuation uncertainty was lifted across virtually all property sectors in September but more than £5bn worth of suspended property funds are yet to provide dates for when they will reopen.
Last week, HMRC confirmed new property funds investments would likely be ineligible for Isas if the proposed notice periods from the FCA go ahead. It is consulting on whether existing property fund investments could remain within Isas.