An FCA proposal aims to boost investors’ confidence in illiquid assets, placing the UK in line with international standards.
TL;DR: review your content’s liquidity language.
The UK regulator has proposed a framework that allows a minimum 90-day redemption notice period for funds that hold illiquid assets.
This applies to managers of non-UCITS retail schemes, but funds can set longer notice periods if their assets or strategy justify it.
Feedback for the consultation (CP25/35) is due by 11 December 2026, and existing funds that are affected would have two years to comply (and give investors at least one year’s worth of notice regarding the change).
The aims are simple:
- For investors, it should grant them a better understanding of how and when they can receive their monies back, and restore confidence in private markets.
- For managers, it allows them ample time to sell assets in an orderly fashion, and reduce suspensions that are driven by liquidity pressures.
The approach attempts to bring the UK into the fold of newer international standards on liquidity management in open-ended funds, too.
FCA market director Michelle Beck says as much, that funds must be clear on whether they offer quick access or are designed for longer-term investments, including property.
So, what does this mean for fund marketers?
Beyond what fund structuring teams must pay heed to right now, marketers will be required to check exactly how a fund is described to the firm’s audience, and that it matches its behaviours if many investors ‘want out’ all at once.
Factsheet, websites, decks, and adviser materials could imply easy access on a fund that holds illiquid assets – “accessible”, “flexible’, “daily dealing” etc. – which needs alterations if its notice period changes.
Similarly if your firm manages or distributes non-UCITS retail schemes, it is worth meeting with compliance to see how any promotional materials describe redemption teams. Or, respond during the open consultation period before 11 December.
Given the likelihood of investor communications changing, funds need to plan on giving their audiences a year’s worth of notice. All materials and channels that cover existing investors and distributors will need a thorough audit, to keep messaging consistent.
Ultimately, funds that state what they are built for from the outset and who they suit will be prepared; far harder to explain following a suspension!
Source
Europa Wire, FCA proposes 90-day redemption notice for UK funds holding illiquid assets
