The UK's Financial Conduct Authority (FCA) is proposing new rules that would require investors in funds holding illiquid assets, such as property, to give 90 days' notice to withdraw their money. The aim is to reduce the risk of mass withdrawals and market stress, aligning UK rules with international standards.
The proposed changes could significantly alter how investors access their money in funds holding assets like property, potentially impacting liquidity for those needing quicker access to capital and requiring greater foresight from investors choosing long-term investment vehicles.
The Financial Conduct Authority (FCA) has proposed new rules aimed at improving clarity and confidence in long-term investment funds, particularly those holding inherently illiquid assets like property and infrastructure. Under the proposals, investors would be required to provide a minimum of 90 days' notice to redeem their investments. This measure is intended to give fund managers sufficient time to sell assets in an orderly manner, thereby reducing the likelihood of liquidity-driven suspensions and mitigating the risk of rushed sales that can depress prices and harm remaining investors.
The FCA stated that the new rules would help firms clearly communicate whether they offer quick access or are designed for longer-term investments. Currently, some funds allow daily withdrawals without notice, creating a risk of payment suspension during periods of market stress due to insufficient cash. The proposed changes would bring UK regulations in line with new international liquidity standards for open-ended funds.
Existing funds would be given a two-year period to comply with the new redemption terms, and investors would need to be given at least one year's notice. The consultation specifically targets Authorised Fund Managers (AFMs) of Non-UCITS Retail Schemes (NURS) that invest at least 50% of their scheme property in inherently illiquid assets, or funds with limited redemption arrangements. The FCA is seeking feedback on these proposals until December 11, 2026, with final rules anticipated in the first half of 2027.
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