By Harrison Folland
The Bank of England has published the minutes of the inaugural meeting of the steering committee of the Productive Finance Working Group. The Productive Finance Working Group was announced in November 2020. Its aim is to propose solutions to barriers to long-term investment.
The Group will run for six months. Primary objectives include: (i) the launch of at least one Long-Term Asset Fund (LTAF), in line with the Chancellor’s public commitment made in November, (ii) to support the establishment of the regulatory framework for an LTAF and (iii) the creation of the necessary operational infrastructure (including intermediaries’ distribution channels, such as investment platforms, being able to support and offer non-daily dealing funds).
The FCA noted that it is “open to re-examining its regulatory framework” and will consider the need for a new authorised open-ended fund structure that will enable investors to access illiquid assets. All rule changes would be subject to the FCA’s ordinary consultation process.
The FCA also outlined six of the most significant barriers to productive investment, which included reluctance among investors to invest in non-daily priced funds, reluctance to invest in less liquid assets, a lack of suitable fund structures to offer exposure to productive finance assets and the capability of investment platforms to support non-daily dealing funds.
Ahead of the next steering group meeting on 4 May, the Steering Committee agreed on deliverables from the Technical Expert Group (TEG). The following three broad classes of solutions were suggested for the TEG to consider: (i) recommendations of potential changes to rules and regulations (for example, around disclosure and permitted links); (ii) improvements to operational infrastructure (for example, platform dealing frequency); (iii) and shifting the ‘fiduciary narrative’ (for example, shifting the focus from cost to net returns and to longer horizons).