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The UK Financial Conduct Authority (FCA) has outlined new regulatory rules aimed at improving clarity and liquidity management for open-ended funds investing in illiquid assets, such as real estate and infrastructure. Under the proposed framework, investors will be required to provide a 90-day redemption notice before accessing their funds. This initiative aims to address structural mismatches where daily redemptions previously created systemic liquidity risks during periods of market stress, leading to forced asset sales and fund suspensions.
By enforcing longer notice periods, the FCA seeks to protect long-term investors from the negative impacts of rushed asset fire sales while allowing asset managers sufficient time to liquidate holdings in an orderly fashion. Existing funds will have a two-year transition period to fully comply with these standards, alongside a requirement to provide investors with a minimum of one year's advance notice. The rules bring the UK regulatory environment into closer alignment with international standards set for open-ended asset management.
Market participants anticipate that these changes will boost institutional and retail confidence in private market assets and property funds. Looking ahead, the FCA is inviting industry feedback on its consultation paper CP26/35 until December 11, 2026. Asset managers and wealth advisors will need to adjust their product structuring, liquidity buffers, and client disclosures during the transition phase to ensure seamless compliance.
