CP26/35: Fair redemption terms for authorised funds investing in illiquid assets

Read CP26/35 (PDF)[2]

Why we are consulting

We want to set clear standards for how firms design and operate their investment products and reduce the risk of people buying unsuitable products. Our proposals will also align these rules with new international standards.

Who this is for

• All Authorised Fund Managers (AFMs).
• Investors in Non-UCITS Retail Schemes (NURS) funds with at least 50% of the value of scheme property invested in inherently illiquid assets, or who are indirectly exposed to these funds through pension or savings wrappers or life assurance policies.
• Investors in any other NURS fund with limited redemption arrangements.
• Fund distributors (such as retail and pension platforms), financial advisers and investment consultants.
• Self-invested personal pension (SIPP) operators.
• Depositaries, regarding NURS funds in scope of these proposals and changes to the Funds Investing in Inherently Illiquid Assets (FIIA) regime.
• Providers of unit-linked life products that reference relevant NURS funds.

Next steps

Online response form[3]

We are asking for comments on this Consultation Paper by 11 December 2026. You can send them to us by using our online response form[3] or by emailing [email protected].  

You can also write to Joshua Carlton, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN

Following this consultation, we will consider the responses and expect to publish final rules in H1 2027.

Background

Fund managers must manage liquidity risks so that investors can exit the fund in line with the terms they chose to invest on. This can be more complex when open-ended funds are invested in assets that take longer to sell, for example real estate, as fund managers need to ensure they still have the liquidity to meet the fund’s redemption policy (how quickly investors can get their money out). They often may need to pay investors before they can sell the more illiquid assets in the portfolio.

In recent years, there has been significant growth in private markets. These are an important route for professional and, increasingly, retail investors to diversify their investment. However, they are less transparent than public markets and it takes longer to find buyers and sellers for private market assets like real estate or infrastructure investments. It is important that funds investing in real estate and other private market assets take account of this reduced liquidity. 

For this reason, we are proposing minimum redemption terms for NURS invested mainly in inherently illiquid assets