22 November 2023
If you are covering the addition of Long Term Asset Funds and Open-Ended Property Funds in Innovative Finance ISAs, please find below a comment from Oli Creasey, property research analyst at Quilter Cheviot:
“Today’s autumn statement included several changes that would allow for property funds, specifically those that are not daily-dealt, to be permitted investment in the Innovative Finance ISA, currently a tax vehicle mainly focused on peer-to-peer loans.
“The change is impactful for several reasons. First, it opens up a new route that would encourage retail investors to be able to (and therefore willing to consider) investment in property. That’s good news for the relatively new LTAF category, which has not yet gained much traction as a vehicle for property investment, though could be a key beneficiary of this.
“The other live issue in the open-ended property fund sector is a long-running consultation process where the FCA are considering whether to require daily-dealt property funds to put in place a redemption delay of either three or six months. This was aimed at reducing liquidity issues in these funds – something that came to a head again recently with several funds being forced to suspend in October 2023. However, no decision has yet been made by the FCA, in part we are told because putting such a delay in place would make those funds ineligible to be held in an ISA (where regular trading is a requirement) – and many of the funds are already wrapped up in retail investor ISAs already, making their removal a real headache.
“Making a non-daily property fund ISA-eligible, even if it is only within the IFISA framework, opens up a pathway where a relatively simple conversion can take place without funds having to be sold due to ineligibility. We imagine that this may then bring forward the final decision from the FCA, which has been a cloud hanging over the open-ended property sector for several years now.”
