June 26, 2019 / 12:01 PM / 3 months ago

Illiquid investment funds 'built on a lie', BoE's Carney says

FILE PHOTO: Bank of England Governor Mark Carney speaks at a press conference at the Bank of England in London, Britain February 25, 2019. Kirsty O'Connor/Pool via REUTERS/File Photo

LONDON (Reuters) - Bank of England Governor Mark Carney said investment funds that include illiquid assets but allow investors to take out their money whenever they like were “built on a lie” and could pose a big risk to the financial sector.

Earlier this month, a flagship fund, the LF Woodford Equity Income Fund, suspended redemptions after a rush of requests by investors seeking to take out their money.

“This is a big deal. You can see something that could be systemic,” Carney told lawmakers about the issue of liquidity mismatches.

“These funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid. And that leads to an expectation of individuals that it’s not that different to having money in a bank,” he said.

Reporting by William Schomberg, editing by David Milliken

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