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(Reuters) – Britain may have to revise its rules on illiquid badets in investment funds after eminent investor Neil Woodford has suspended withdrawals from its flagship equity fund. last week, announced Sunday the head of financial regulation.
"The Woodford Fund's inability to cope with investor withdrawals raises the question of whether rules requiring liquid badets to work properly," said Andrew Bailey, chief executive of the Financial Conduct Authority, at the address https://on.ft.com. / 2I6flwq in the Financial Times.
the FCA will examine the problems of the Woodford fund when finalizing the new rules on investment funds that allow investors to withdraw their money at any time, he said.
Woodford was forced to freeze its equity income fund because it could not sell some of its most illiquid badets fast enough to meet a flood of redemption requests.
Mutual funds like Woodford's are required to limit their holdings of unlisted badets to 10% of their total portfolio. Woodford placed in vehicles some unlisted badets that his fund had held and then listed them in Guernsey, which made him wonder whether he was complying with the spirit of those rules.
"Simply listing a non-listed company overseas does not make the stock more liquid," Bailey said.
the FCA already established new rules for open-ended investment funds following the suspension by a number of UK real estate funds of withdrawals following the 2016 Brexit referendum.
"We will take lessons learned from the Woodford fund into consideration when finalizing these new rules," Bailey said.
(Report by Rachel Armstrong in London and Rama Venkat in Bengaluru, edited by Bill Trott)
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