The Financial Conduct Authority has proposed minimum redemption terms for non-UCITS retail schemes that invest at least 50% of their assets in inherently illiquid assets such as property and infrastructure. Affected funds would be limited to one redemption dealing day a month and would have to apply a notice period of at least 90 days, regardless of their current dealing arrangements. The measures would align the regime with international liquidity standards and the long-term asset fund framework, reducing reliance on cash buffers and the risk of dilution, forced asset sales and liquidity-driven suspensions. The proposals would also allow managers of any non-UCITS retail scheme to introduce limited redemption arrangements where needed to align dealing terms with the fund’s liquidity profile. Funds using such arrangements would face strengthened disclosure requirements covering redemption delays and investors’ exposure to market movements during the notice period. Managers would gain broader deferral powers, while redemption requests could be revoked only where the manager agrees and determines that other investors would not be prejudiced. Similar revocation flexibility is proposed for long-term asset funds. Existing affected funds would have two years to comply and would have to give investors at least one year’s notice. New funds would become subject to the rules six months after final rules are made. The FCA estimates that 17 funds with aggregate net asset value of about GBP 7.22 billion would meet the proposed definition, including approximately GBP 3.07 billion held by retail investors. It will take Stocks and Shares Individual Savings Account eligibility into account when deciding whether and when to finalize the rules, as loss of eligibility could cause material disruption.

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