FCA announces joint working group on investment in productive finance

In a press release on 20 November, the FCA announced that, along with HM Treasury and the Bank of England, it will be putting together a working group to facilitate 'investment in productive finance' i.e., investment that "expands productive capacity, furthers sustainable growth [...] such as plant and equipment, research and development, technologies, infrastructure and unlisted equities related to these sectors".

One of the issues that the working group will have to consider is that such investment can require long-term commitment on the part of investors but the need to maximise the amount of capital raised may mean reaching out to investor types which tend to need to be able to redeem their investments on shorter notice.

We look in detail at this challenge - and the need to overcome it - in our recent note, '10 things you should know about the Democratisation of Private Assets'

What will the working group be looking at?

The working group's aim is to put forward:

• solutions for the barriers to investment which can be implemented by industry participants. This, apparently, includes looking at possible new fund vehicles, such as the long-term asset fund (LTAF), which is intended as a means of investing in long-term assets while meeting the demands of a wide range of investors, including defined contribution pension funds.

• a roadmap, timetable and set of actions to implement those solutions.

Who'll be on the working group?

The working group will be co-sponsored by the heads of HM Treasury, the Bank of England and the FCA. It will draw its members from a wide range of the financial services sector, including banks, asset management firms, pension funds, wealth managers, investment platforms and relevant trade associations.

The working group will build on work already done in this area - this includes the Report on HM Treasury's Patient Capital Review and the Investment Association's (IA) proposals for a LTAF, which it put forward in its response to the FCA's Discussion Paper on Patient Capital and Authorised Funds - see our summary of the FCA's Feedback Statement, FS 20/2, here.