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AIC responds to the Financial Policy Committee’s Financial Stability Report

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6 August 2020

FPC acknowledges that closed-ended funds may be a more appropriate vehicle for investing in illiquid assets.

The Association of Investment Companies (AIC) has responded to the Bank of England Financial Policy Committee’s Financial Stability Report.

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said: “We welcome the Financial Policy Committee’s acknowledgement that closed-ended funds may be a more appropriate vehicle for investing in illiquid assets such as property. Once again the FPC has highlighted the potential systemic risks posed by daily-dealing open-ended funds investing in illiquid assets. Particularly encouraging is the FPC’s focus on addressing market distortions that could discourage the use of closed-ended funds to access less liquid assets that are important for providing investors with diversification and promoting productive investment in the economy.

“While open-ended funds with longer notice periods are also discussed in the latest Financial Stability Report, we are pleased to see the FPC reaffirm the principle that these notice periods should align with the time actually taken to sell underlying assets. We strongly agree with this principle and are concerned that 90/180-day notice periods may not be sufficient to address the problems arising from liquidity mismatches in open-ended funds.

“The FPC’s report highlights the need to support the supply of long-term capital to various areas of the economy where underlying assets are illiquid. Investment companies have an important part to play as they have a proven record of investing in illiquid assets such as private equity, growth capital, venture capital and infrastructure, where their closed-ended structure is ideal. We look forward to working with regulators and policymakers to build on these successes.”

The AIC’s paper Square peg in a round hole, tackling the dangers of holding

illiquid assets in open-ended funds, is available here.


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  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 360 members and the industry has total assets of approximately £202bn.
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