The Financial Conduct Authority has proposed requiring investors to give at least 90 days' notice before redeeming from retail funds invested mainly in illiquid assets. The change would give managers more time to arrange asset sales and require distributors to accommodate a substantially longer exit process.[3]
Consultation CP26/35, published on 8 October, targets Non-UCITS Retail Schemes with at least 50% of the value of their scheme property invested in inherently illiquid assets. Its relevance extends to investors holding these funds through pension and savings wrappers or life-assurance products, as well as directly.[1]
The FCA's rationale is the mismatch between assets that take time to sell and funds offering rapid withdrawals. Meeting redemptions can require substantial cash buffers, hurried sales or suspensions. Longer notice would give managers a better opportunity to sell assets in an orderly way and reduce the pressure on investors who remain in the fund.[3]
The proposed redemption framework
| Element | Proposal |
|---|---|
| Minimum notice | At least 90 days before the redemption dealing dateSource 2 |
| Dealing frequency | No more than one redemption dealing day each monthSource 2 |
| Existing funds | Two years to implement the new requirementsSource 3 |
| Investor communication | At least one year's notice before existing funds change their termsSource 3 |
A redemption request would also involve price uncertainty during the notice period. The relevant valuation comes after that period, so the amount ultimately received can move with the fund's value. Managers could set longer notice where the portfolio requires it; the minimum would not make every illiquid asset sale achievable within 90 days.[2]
For platforms, the difficult work reaches beyond changing a withdrawal message. The consultation identifies complications for transfers, switching between funds with different redemption terms and rebalancing model portfolios. A pending redemption can leave an instruction outstanding while other holdings move, requiring systems and customer communications to reflect that timing accurately.[2]
The proposals therefore affect fund managers, depositaries, advisers and distributors, including pension platforms and SIPP operators. Their common implementation question is how the fund's dealing timetable will flow through to the account or wrapper in which the customer holds it.[1]
Comments are due by 11 December 2026. The FCA expects to publish final rules in the first half of 2027, after considering responses; the consultation has not yet changed investors' contractual redemption terms.[1]
Sources & further reading
- CP26/35: Fair redemption terms for authorised funds investing in illiquid assets Financial Conduct Authority · 8 Oct 2026 · Accessed 20 Oct 2026
- CP26/35: Fair redemption terms for authorised funds investing in illiquid assets — consultation paper Financial Conduct Authority · 8 Oct 2026 · Accessed 20 Oct 2026
- New rules to make long-term investment funds clearer Financial Conduct Authority · 8 Oct 2026 · Accessed 20 Oct 2026