The U.K.’s Financial Conduct Authority (FCA) will introduce rules to enable a new type of investment fund that holds longer-term assets, such as infrastructure, real estate, private equity and debt, and venture capital.
Given that those assets are tougher to sell than conventional stocks and bonds that have ready secondary markets, the new regime sets rules designed to ensure consistency between the time required for asset sales and the timing of investor redemptions.
The new funds will be targeted at pension managers, but may also be available to sophisticated, high-net-worth retail investors. The FCA said it will consult on expanding the funds’ availability to a broader class of retail investors next year.
“While this would potentially open a controlled route for retail investors to higher-risk assets … safeguards would also be needed to ensure retail investors understand the risks involved,” the FCA said.
The FCA said the new long-term funds will also support financial stability and economic recovery by facilitating investment in areas that can find it tougher to access capital.
“We are supporting fresh collaborative thinking designed to improve the effectiveness of U.K. markets while protecting standards,” said Nikhil Rathi, CEO of the FCA, in a release.
“If this innovative fund structure, created by our rules, is taken up by the asset management industry, it may provide alternative routes to returns for investors, while supporting economic growth and the transition to a low-carbon economy,” he added.