The Investment Association (IA) is planning a new type of fund after the suspension of the Woodford Equity Income Fund and an attack on ‘open ended’ investments by the governor of the Bank of England.

Mark Carney savaged what he called “open ended” investment funds with high levels of illiquid holdings when he gave evidence at the Parliamentary Treasury Select Committee this week.

Mr Carney said such instruments were “built on a lie” and had the potential to cause “systemic” damage in the wake of the Woodford suspension.

He told MPs that the type of fund had engendered “an expectation from individuals that it is not that different from having money in a bank”.

He added: “These funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren't liquid.”

In response Chris Cummings, chief executive of the Investment Association, said: “The UK fund industry offers more than 8,000 funds in a highly regulated environment to cater to a wide variety of needs for consumers, and offering options with daily liquidity is a crucial part of that mix.

“There are also cases where investment on a longer-term basis, with less frequent redemption intervals will be more appropriate, which is why we have today outlined our plans for a Long-Term Asset Fund.

“This new type of fund structure will enable investment in a wider range of assets, giving greater choice and unlocking new long-term investment opportunities for savers and providing companies and infrastructure projects with much-needed funding. 

“Investment managers and fund operators take their duties to consumers very seriously and we look forward to engaging with the governor on this issue.”