around 3 % of their assets to unlisted equity. the collective investment funds, in which they and others invest, allocate only 2 %. [ see slide 6 of accompanying deck ] there seem to be biases in the system. even investors who should have the longest horizons seem to have a fetish for liquidity and an aversion to really illiquid growth capital assets. getting to the bottom of this should be the focus of our efforts. consider the £1. 4 trillion of assets in uk investment funds. the mass of these – just over 85 % by assets – are open ended14, offering investors the opportunity to redeem their holding for cash each day by selling a slice of the funds ’ assets. because they offer this, these funds aren ’ t suited to investing in highly illiquid growth capital. the alternative closed end fund structures issue a fixed number of shares, which can be listed on a stock exchange. because investors ‘ redeem ’ by selling their share to another in the secondary market ( and typically at a discount ), the assets held in the fund do not need to be traded. these funds are therefore more able to invest in truly illiquid growth capital. so it is no surprise that a bigger proportion of their assets is allocated to assets like unlisted equity [ see slide 6 of accompanying deck ] but these funds are much smaller. see letter from the chancellor of the exchequer to the governor of the bank of england : financial policy committee remit : budget source : association of investment companies, the investment association, and bank calculations all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice an investor bias towards open - ended funds arises in part because some seem to offer the irresistible, but inconsistent, combination of a return from holding less liquid assets – like property and corporate credit – and at the same time the opportunity to redeem daily at little cost. a liquid investment with illiquid returns : what ’ s not to like? [ see slide 7 of accompanying deck ] closed ended funds ( and open ended funds with long notice periods ) might be able to invest in truly illiquid growth capital and offer an even higher return. but not enough to compensate for the appropriate lack of a quick redemption offering. the inconsistency in some open ended funds makes them look unduly attractive. until of course the inconsistency is exposed, when investors

have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity - exporting economies, particularly the chinese economy. for these reasons, there is an increasing risk that an improvement in the business confidence of japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected. in order to preempt the manifestation of this risk and to maintain momentum toward achieving the price stability target of 2 percent, the bank introduced “ quantitative and qualitative monetary easing ( qqe ) with a negative interest rate ” in january 2016. the bank will lower the short end of the yield curve by slashing its deposit rate on current accounts into negative territory and will exert further downward pressure on interest rates across the entire yield curve, in combination with continued large - scale purchases of japanese government bonds ( jgbs ). the jgb yield curve has declined after the introduction of “ qqe with a negative interest rate, ” bis central bankers ’ speeches and policy effects have been seen. going forward, these effects are likely to steadily spread to both the real economy and the price front. the bank will continue with “ qqe with a negative interest rate, ” aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. it will examine risks to economic activity and prices, and take additional easing measures in terms of three dimensions – quantity, quality, and interest rate – if it is judged necessary for achieving the price stability target. in global financial markets, risk aversion of investors has been spreading excessively around the globe recently. the bank will carefully monitor how the developments in global financial markets influence japan ’ s economy and prices. thank you. bis central bankers ’ speeches