The UK Financial Conduct Authority on 8 October published CP26/35, proposing that retail funds invested mainly in property and other hard-to-sell assets limit redemptions to once a month and require 90 days’ notice. The FCA tried this in 2020 with CP20/15 and paused it, partly because platforms could not handle notice periods and partly because IOSCO and the FSB were rewriting international liquidity standards. Those standards are now in place, and the FCA has decided that platform readiness should no longer hold the rule back.
The scope is wider in law and smaller in practice
The proposals cover non-UCITS retail schemes (NURS) with at least 50% of scheme property in “inherently illiquid assets”, which the FCA describes as assets that cannot normally be sold quickly without a significant loss in value, such as property and infrastructure. The 2020 version covered only real estate. Widening the definition brings the UK into line with IOSCO’s treatment of such vehicles as Category 3 illiquid funds, for which IOSCO recommends long notice or settlement periods.
The market caught by the rule has shrunk. The consultation paper estimates that 17 funds, including feeders, with aggregate net asset value of about £7.22 billion would be classed as funds investing in inherently illiquid assets (FIIAs), as of December 2025. Retail investors account for £3.07 billion of that. In 2020 the equivalent count was 31 funds, a fall of 45%. The FCA suggests the decline may reflect closures of property funds and others moving to hybrid models with less than 50% in illiquid assets.
Monthly dealing and 90 days’ notice mirror the LTAF
The FCA proposes that a FIIA must not have a redemption dealing day more often than once a month, and that investors give at least 90 days’ notice. Both terms match the long-term asset fund (LTAF) regime. CP20/15 had floated a notice period of 90 to 180 days, and the FCA chose the low end to keep the two regimes consistent.
The paper explains why it wants both limits together. If a fund deals daily with a 90-day notice period, requests pile up for consecutive dealing days and the manager is less able to plan sales. With a fixed dealing point, the manager knows the full liquidity demand for that day in advance and can sell property to meet it. Managers can choose longer notice periods where their assets need it, and subscriptions can remain more frequent than redemptions if the fund is valued at each subscription point.
Funds should be clear about whether they offer quick access or are built for longer-term investments like property.
Michelle Beck, director, markets, FCA, 8 October 2026
Existing funds get two years and must give investors a year’s warning
The FCA says existing funds would have two years to comply and must give investors at least one year’s notice of the change. The consultation also lets any NURS manager adopt limited redemption arrangements voluntarily, and allows LTAF investors to revoke a redemption request during the notice period where the manager is satisfied this is not unfair to other investors.
The investor trade-off is set out in the cost benefit analysis. The FCA’s central estimate is £43.88 million in 10-year present-value benefits from funds holding less cash, against £15.37 million of direct implementation costs to firms and between £16.95 million and £37.84 million of costs to investors who lose quick access to their money. The central net present value is £1.95 million, within a range of a £9.37 million net cost to a £12.05 million net benefit. The FCA itself calls the quantified analysis “finely balanced”. Its case rests on the benefits it says it cannot measure reliably: fewer liquidity-driven suspensions and less incentive to redeem ahead of other investors in a stress.
Platforms decide whether the rule works
The FCA concedes that the distribution system was built around daily dealing. Some retail platforms have upgraded to handle notice periods and others “still have significant challenges”, according to the paper. The cost benefit analysis assumes FIIAs stay eligible for stocks and shares ISAs, but its retention scenarios turn on how many platforms, advisers and model portfolio providers support notice periods.
For managers of the 17 funds, the practical risk is that platforms that cannot process a 90-day notice simply delist the fund, forcing investors to sell before the rule bites. The FCA’s two-year transition gives platforms time to build, and managers should press their distributors for commitments early in that window.
What to watch
- 11 December 2026: comments due on CP26/35.
- First half of 2027: the FCA expects to publish final rules.
- Platform announcements on support for funds with notice periods.
- Whether managers of hybrid funds move below the 50% threshold to stay outside the regime.
Primary sources
- FCA, New rules to make long-term investment funds clearer, 8 October 2026
- FCA, CP26/35: Fair redemption terms for authorised funds investing in illiquid assets, 8 October 2026
- FCA, CP26/35 consultation paper (PDF), October 2026
Photo (cropped): Yirba, CC0 via Wikimedia Commons
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